Sunday, April 12, 2015

On Alchemy, Economics and Infrastructure

Oil times are changing, and not in a good way. (Photo by AZRainman/Flickr)

This photo is a very dramatic metaphor of what might happen when we run out of oil. Of course, it’s a exaggeration. We might not need many oil-tankers but we will certainly not be back to the Silky Road with camel caravans. And unnecessary tankers will be broken up and recycled. (Recycling will be an important issue for the future, I’m sure!)
The danger with this kind of metaphors is the life or death situation that it illustrates. It’s no coincidence that it is from an US-based blogger. Over there, believers and deniers of the energy crisis more or less agree that it’s now life or death at stake – believers praying for a Green future and deniers taking the Rambo Road.
So there’s two extremes against each other – not an unusual American situation, we’ve seen, but we have to find our own way kind of middle way to the future – my essay for today:

Modern economists are now at risk of sharing our silly jokes about lawyers.
Serious writers are referring to them as “so called economists” in our even papers (Roman Grynberg – thank you). And they only have to blame themselves taking the Reagan-Thatcher road some decades back. Becoming some kind of modern alchemists making wealth of junk bonds, sub-prime loans etc. (very much posh cars, here – visitors are amazed) recommending overseas investment rather than investing profits in the mother country (and forcing governments to look for alien investors). It is a sad story – nothing but medieval kind of alchemy!
As we know, alchemy was the game of making gold out of other metals and stuff in times not too distant to our industrial epoch. Medieval wizards often died of unforeseen “externalities” as lead fumes and sudden bursts of retorts. Very similar to the bursting ‘bubbles’ we now and then have, apart from seldom causing physical harm to the banking CEO’s. But the suicides among them are on the rise, we hear!
However, there are clever economists and, not surprisingly, of an older school of economy. The most influential was John Maynard Keynes of the Bloomsbury Society. He already in the early 1920-ies realized what the outrageous conditions for Germany (after WW1treaty) would create. Something similar what the West today is imposing to Libya, Iraq, Iran, Syria and, why not, Russia. And his general ideas about how to keep a working class in production with decent earnings (to secure sales) was widely accepted by so called “welfare” countries – and obviously an inspiration to Sir Seretse Khama.
Neo-liberalism (dogma mostly from the Chicago School of Economics and seconded by a Nobel Prize to Milton Freedman) stopped that with the help of Reagan and Thatcher - we got “reaganomics”, instead - free trade, free markets, no economic/custom hindrances, restrictions on government spending and so called economic globalization. Remarkably, globalization had been tried by many former empires and never worked! But we know that economists of today are/were not interested in history, for sure!
(Well, I added “were” above as we know from Prof. Grynbergs recent article that there is a kind of rethinking among IMF and World Bank economists today. An interesting development, indeed!)
There is high anxiety in the world, pondering about externalities, and time to get the economic balance books in proper Italian double order. Important here is to try and see what must happen when extrapolating a modest 3-4% rate of industrial growth for the distant future. Let’s go…
After 4 centuries, the economy will have grown by a factor of 136,424 and consequently a hundred thousand times as much energy will have to be generated as for today. The impossibility of endless growth is even more clear if it should go on for 8 centuries – the growth factor is then 186 million at a modest 3% growth a year!
I’m here quoting from a recent article “by Prof. John Scales Avery’s (former advisor to WHO and once leader of the Pugwash Group that received the Nobel Peace Prize in 1995) and will continue some more quoting from him.
When heaping insults on modern “so called economists”, we also have to mention a few exceptions. Prof. Avery’s is pointing out Frederik Soddy, Nicholas Georgiescu-Roegan, Herman E Daly, Aurelio Pecci and Thorkil Kristensen. My own favourite is Keynes, who put the few ‘welfare states’ in order.
Frederik Soddy and Nicholas Georgiesco-Roegan introduced the concept of entropy into economics. They visualized economy as the digestive system of society. It “eats” resources and derives from them the strength to drive the machinery of society. Later, it excretes the resources in a degraded form. Obviously this is not a circular process, since the degraded resources simply cannot be “eaten” again. For example, fossil fuels, once burned, cannot be burned again. Since only cyclic processes are sustainable, only renewable processes energy is sustainable. Furthermore, cyclic processes can use only materials that are renewable, like natural fibers. Today those ideas are very ably advocated by Georgiescu-Roegans student Prof. Herman E Daly. (See his Steady State writings on The Daly News site/JW).
Furthermore, the Club of Rome was founded by Aurelio Pecci and Thorkil Kristiansen and a few more farsighted economics. A club/organization of a group of world citizens, sharing a common concern for humanity. A study of future availability of resources was commissioned and published in 1972 under the title “Limits of Growth”, It predicted that that many resources, such as metals and fossil fuels, will be exhausted by middle 21st century, that pollution will increase markedly, and that industrial production and population will begin to decline. The book was greeted with anger and disbelief by the community of economists and these emotions surface today whenever it is mentioned.

The late 60-ies and early 70-ies had a lot of careful, cautious and intelligent economists, probably as they early had been part of western countries industrial development and experienced a few economic bursts. They saw the risks with what we now call “externalities” and became what we now call whistle-blowers. They were political economists, food researchers or agriculturalists, geologists, physiologists…… fill in the blanks! They certainly warned about ongoing predatory exploitation of finite resources – be it oil, gas, coal, water, unsustainable lifestyles as well as uncontrolled air and water pollution. But the new, modern so called economists didn’t listen and, worse, not elected leaders (with Finance Ministries filled up with gratis Chicago Boys), either.
During my last university year in 1965, we students of architecture (town planning was a voluntary sideline, then) were recommended by our history professor to read “Limits for our Existence” by Georg Borgstrรถm, later professor at Michigan State University. We read his book (years before Club of Rome, actually) and listened to his lectures but already then it was too late for us ’modern’ students. The “eternal progress train had started and to earn money we had be on to be on the train, sad to say.
Consequently, I cannot but understand the situation that most developing countries are in today. There was hardly any coherent alternative to the massive neo-liberal economic concept from western development institutions and charitable donors for newly independent developing countries then. The “hidden” conditions were just as important as the job was for new architects and town planners.
But there were serious consequences when the developing countries applied this kind of outdated, high cost, western, somewhat outdated technology (an
inheritance from the colonial powers, I insist) – mostly concerning infrastructure and utility service that we more or less copied from the west. Obviously not considering the problems developed countries had with aging infrastructure networks and service delivery and the end cost for it when energy became expensive.
By the late 60-ies it was obvious that the infrastructure sector was falling apart in the west – maintenance was neglected and cost of delivery escalated quickly - esp. after the first oil bubble burst in early 70-ies. There were huge external costs never assumed, and environmentalists started their whistle-blowing. For some economists things were written on the wall – for example E F Schumacher (with his famous book “Less is Beautiful”) advised that developing countries must find appropriate technology approach and localized production and delivery of service. But the appropriate’ development authorities were handcuffed by its former colonial masters. And the western infrastructure warehouses were full of stuff to send to new “independent” countries often almost gratis. The producing of outdated, conventional stuff could go on and supporting the workers at home. in full swing. And developing countries were ever so grateful until they had to pay the full price. I know this game – when I was young, the welfare people got water and power almost gratis, esp. pensioners like my grandmother (even a flushing toilet). But 25-30 years later, the situation changed and people started to pay real costs – possible in countries of full employment and alert unions.
Thus, we have outdated (and not appropriate) infrastructure and service delivery systems in Africa and elsewhere among developing countries - more than century old infrastructure models from densely populated European countries even in sparsely populated areas in Africa.
When I arrived to Gaborone in early 1979, Gaborone had its own electricity plant. And there is no economy flight for 300MV from Morupule to Gaborone. The delivery system lost 1/3 of its energy on the way here and another 1/3 was lost in imperfect western wiring in the consumer’s home. And now we must pay for it!
We also discover that there is no quality in delivered coal burners for Morupule B – actually we didn’t know that our low quality coal was never meant to be used in modern steamers (according to many engineers). Most of Chobe River will be needed to clean and upgrade the coal we now have to produce to export quality. And most of the world is moving away from burning coal as externalties are too expensive. It’s a sad story of jumping onto the wrong train, indeed.
When we experience power and water on/off and blocked sewers, we mustn’t put all the blame on our utilities and its staff. The technology was wrong for a start and not appropriate – leading me to realize that the physical planning was also very wrong. But on this I remember that Gaborone was never meant to be more than for 25-30,000 people. And then more “gaborones” needed to be built and connected with communication. To me, that had been appropriate planning!
In short – we jumped onto the wrong train a few stops from the end station. There is an immense task for planners and utilities in the close future. But moving to Palapye on the same conditions we have now is not a solution. That’s an ostrich reaction. De-industrialization is ongoing and we have an important discussion ahead!
- JW
March 20, 2015

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