Category: Economics

Matters of money

Saudi Arabia and the political economy of oil

The fact that oil money helped develop the power of the muwahhidun in Arabia after 1930 and made possible the resurgence of Islamic political movements in the 1970s has often been noted. But it is equally important to understand that, by the same token, it was an Islamic movement that made possible the profits of the oil industry. The political economy of oil did not happen, in some incidental way, to relied on a government in Saudi Arabia that owed its own power to the force of an Islamic political movement. Given the features of the political economy of oil – the enormous rents available, the difficulty in securing those rents due to the overabundance of supply, the pivotal role of Saudi Arabia in maintaining scarcity, the collapse of older colonial methods of imposing anti-market corporate control of the Saudi oilfields – oil profits depended on working with those forces that could guarantee the political control of Arabia: the House of Saud in alliance with the muwahhidun. The latter were not incidental, but became an internal element in the political economy of oil. ‘Jihad’ was not simply a local force antithetical to the development of ‘McWorld’; McWorld, it turns out, was really McJihad, a necessary combination of social logics and forces.

Mitchell, Timothy. Carbon Democracy: Political Power in the Age of Oil. Verso; London. 2013. p. 213 (italics in original)

Mitchell on “Carbon Democracy”

A surprising oversight in Timothy Mitchell’s generally-insightful Carbon Democracy: Political Power in the Age of Oil is how he gives relatively little consideration to static versus mobile forms of fossil fuel consumption. He strongly emphasizes the production and transportation logistics of coal versus oil, but gives little consideration to special needs for fuels with high energy density (and sometimes low freezing points) in transport applications from cars and trucks to aircraft and rockets. People sometimes assume that oil demand and electricity production are more related than they really are, especially in jurisdictions where oil is mostly used as transport fuel and for heating (both areas where little electricity is generally used).

At a minimum, I think it’s important to give some special consideration to the needs of the aerospace and aviation industries, especially when pondering biofuel alternatives. Also, we need to try to project things like the deployment rate of electric ground vehicles in various applications, when trying to project how the forms of energy production and use in the future affect politics and low-carbon policy choices.

China continuing with coal

A characteristic of climate change policies around the world is a disjuncture between targets states adopt and the policies they implement. States pledge to keep warming below 1.5-2.0 ˚C, but then make all sorts of choices which are fundamentally at odds with that trajectory: not pricing carbon, building new high-carbon infrastructure, and generally failing to act with seriousness and urgency.

A New York Times story demonstrates how bad the disjoint in Chinese policy is. They note: “Chinese corporations are building or planning to build more than 700 new coal plants at home and around the world, some in countries that today burn little or no coal” and “The fleet of new coal plants would make it virtually impossible to meet the goals set in the Paris climate accord”. Most of the proposed construction is outside China:

Shanghai Electric Group, one of the country’s largest electrical equipment makers, has announced plans to build coal power plants in Egypt, Pakistan and Iran with a total capacity of 6,285 megawatts — almost 10 times the 660 megawatts of coal power it has planned in China.

At a time when the disastrous climate plans of Trump and the U.S. Republicans are making people hope that Chinese leadership can fill the gap, China’s unwillingness to abandon coal is a major reason why today’s policies are still leading toward global climate catastrophe.

A new format for the Olympics?

So many recent Olympic games have had a questionable legacy and, since the world as a whole needs to be undertaking a massive effort to function more sustainably, it seems like the itinerant period in Olympic history might be appropriately brought to an end.

It’s lunacy to build Olympic-level athletic facilities over and over again, particularly since many of them (like ski jumps and bobsled tracks) cannot be safely used by anyone outside a tiny handful of world class athletes.

Instead, it seems much more sensible to adopt one of two approaches: the establishment of permanent homes for the summer and winter Olympics in suitable locations where the facilities already exist, or the dispersal of the Olympics with events to happen in different places around the world which already have facilities in place. Either approach would eliminate the role of the Olympics as a national prestige project, but that’s arguably where most of the problems come from, from massive spending on security and facilities to corruption.

House prices in Canada

Many journalistic sources have been commenting on the possibility that house prices in Canada have risen at unsustainable rates. Recently, The Economist printed:

Household debt has climbed to almost 170% of post-tax income. House prices rose by 20% in the year to April. Looked at relative to rents, they have deviated from their long-run average by more than any other big country The Economist covers in its global house-price index. In Toronto, one of two cities, along with Vancouver, where the boom has been concentrated, rental yields are barely above the cost of borrowing, even though interest rates are at record lows. In its twice-yearly health-check on the financial system, published this month, the Bank of Canada concluded that “extrapolative expectations” are a feature of the market. In other words, people are buying because they hope, or fear, that prices will keep rising.

They also note that house price inflation in Toronto is above 30%.

To me, a lot of this coverage seems to miss the link between house price inflation and global wealth inequality. People who own valuable assets have, in many cases, seen their wealth rise rapidly, while those reliant on wages have seen it stagnate or fall.

I think governments ought to be thinking much more seriously about policy mechanisms to curb inequality, including wealth taxes and guaranteed minimum incomes. This is both because much of the accumulation of wealth by the wealthy has been undeserved and because inequality distorts politics and social relations, making it harder to confront other problems.

Related:

Lots of significant climate news

CPSA is keeping me busy, but there have been some interesting news stories in the last few days:

Overall, recent developments are worrisome. We know how short a window there is for action capable of hitting the Paris Agreement’s targets, and yet we continue to make contradictory policy choices.

UTAM’s first ESG report

As called for in President Gertler’s “Beyond Divestment” decision, the U of T Asset Managament Corporation (UTAM) recently released their first report on incorporating environmental, social and governance (ESG) factors into the management of the school’s $9 billion portfolio (PDF).

I’m pretty tied up with the Canadian Political Science Association conference from tomorrow to Thursday, when I will be presenting a paper on pipeline resistance, but I will give it a close look afterward.

The original student group that primarily implemented the U of T divestment campaign has dissolved, but there are still efforts at subsidiary bodies like colleges and CUPE 3902 and there is at least some student interest in reviving a university-wide campaign.

Democracy and fossil fuels

The rise of mass democracy is often attributed to the emergence of new forms of political consciousness. The autonomy enjoyed by coal miners lends itself to this kind of explanation. There is no need, however, to detour into questions of shared culture or collective consciousness to understand the new forms of agency that miners helped assemble. The detour would be misleading, for it would imply that there was some shortage in earlier periods or other places of people demanding a less precarious life.

What was missing was not consciousness, not a repertoire of demands, but an effective way of forcing the powerful to listen to those demands. The flow and concentration of energy made it possible to connect the demands of miners to those of others, and to give their arguments a technical force that could not easily be ignored. Strikes became effective, not because of mining’s isolation, but on the contrary because of the flows of carbon that connected chambers between the ground to every factory, office, home or means of transportation that depended on steam or electrical power.

Mitchell, Timothy. Carbon Democracy: Political Power in the Age of Oil. Verso; London. 2013. p. 21

Two responses:

First, it’s unfamiliar to think of fossil fuels as a positive force for social welfare.

Second, perhaps the familiar climate activist strategy of building a social movement is insufficient and we need to think about what means (if any) can align power with the objective of a stable climate.

Establishing a Responsibility to Repair

The concept of Right to Repair is meant to help consumers and tinkerers keep their vehicles, electronics, and other equipment going, despite the preferences of manufacturers that they buy something new or at least pay the original builder for any repairs.

In a more sustainable world, we can imagine a Responsibility to Repair, where any manufacturer of a product intended to be durable – from a phone or laptop to a car or house – would be expected to support repairs by providing blueprints and source code, by making spare parts available, and by designing products in the first place so that failures can be repaired (a) by individual users (b) by third-party repair centres and (c) by the company itself.

This is the opposite of the Apple philosophy of keeping everything secret, building machines that cannot be taken apart, and throwing away anything broken to replace it with something new.

In a Responsibility to Repair world, governments could keep track of all devices which consumers report as broken and impossible to fix, and then press companies to comply with regard to those items. Companies that refuse could face sactions from fines to losing the right to advertise to losing the right to make products in certain categories.

It would be the end of planned obsolescence, and the start of a much more sustainable form of consumerism. Even for companies that close down, this approach would create multiple benefits, since their design specifications and software would be openly available and their products would be designed with public repair in mind from the beginning. If one big jurisdiction like the EU were to establish laws of this kind, the benefits would be felt around the world.

Canada and climate ethics

On Friday, I presented my paper “Canadian Climate Change Policy from a Climate Ethics Perspective” at the Centre for Ethics’s graduate conference: Imagining 150: The Ethics of Canada’s Sesquicentennial.

The paper was well received and the conference overall was worthwhile and a welcome variation on the standard political science gathering.