The Quiet Road

Just a quickie. In my recent post (The next great wave of Irish emigration) about the collapse of the Irish property market and the mountain of debt it has created for us all, I suggested that there’s “an estimated quarter of a million newly built houses and apartments standing empty”. I must apologise as my estimate was somewhere between 20% and 40% out. It turns out, according to the most recent data, that in fact the number is “believed to be between 352,414 and 301,682”.

That’s a whole lot of vacant houses for a nation of 4.4 million.

For about 12 years starting in the mid-90s a bunch of private business concerns decided to buy large tracts of land in Ireland (particularly around Dublin) and “develop” them by building luxury apartments and hotels. Competition was high because every property developer in the country had bought into the same delusion. Somehow they convinced themselves that this was a no-lose proposition. Property values shot up. Greenfield sites in the Dublin commuter belt increased in value by a couple of hundred percent within a few years. And brownfield sites in the city centre rose by even more. It was sheer lunacy.

Which, in itself, wouldn’t have been a problem. No, it became a problem when this small group of developers succeeded in convincing the banks and the government to join their party. And so together, the bankers, speculators and developers — breathlessly urged onwards by politicians tripping over themselves to rezone land and dismantle regulatory frameworks — dragged the nation relentlessly into a deep dark hole. Massive loans were granted based on absurd valuations and overnight a mountain of debt appeared in Dublin’s financial district.

The half-dozen or so sane people left in the country shook their heads ruefully and suggested that there was only one way for this to end… the same way all collective delusions end… with a bone-shaking return to reality and lots of wailing and gnashing of teeth. Of course nobody listened. We were labelled doom-mongers and pessimists. “Shut up and let me enjoy the party”, they’d say, and we’d wince as they shovelled another gramme of future debt up their nose. It’s gonna be one hell of a come-down, we’d mutter as they gave us dark scowls and dismissive gestures. “Come down?! Don’t be such an arsehole”, they’d yell, “I can keep snorting this stuff forever”.

Sadly, there the drug analogy ends. A hangover or comedown may be managed via the skillful application of hair-of-the-dog. Not the case with a property crash. Especially not one that happens just prior to an energy crisis. The Irish people find themselves slumped, sweating and groaning, on the bathroom floor. The economy flushed to get rid of the stench. All that remains of it is a foul stain on our shirt and a few nasty dried flecks stuck to our hair. Ugly reminders of our willingness to trade our future and that of our children for a few years of hedonism.

You see, as was entirely predictable… indeed inevitable… property prices crashed. And how! The Irish Glass Bottle site in Ringsend, which has become something of a symbol of the insanity that gripped the nation, has seen an 88% drop in valuation since the bubble burst. Purchased for €412 million in 2006, it has recently been repossessed by the bank that provided the loan and is for sale for €50 million. There are no interested buyers.

There are now an estimated quarter of a million newly built houses and apartments standing empty in “ghost developments” around Ireland. This, in a country with a population of four million. Safe to say the prospects for a recovery in the Irish residential property market aren’t good. In fact, probably the only remaining positive aspect of the property boom is the new nomenclature that has sprung up to describe the folly. Ghost developments sounds pretty cool, but even better is ‘Zombie hotels’, which is the phrase being used to describe the dozens of brand new hotels that are slowly choking the life out of established businesses. The massive over-capacity is forcing equally massive rate cuts. Good news, you might think, for the consumer but it’s crippling the entire sector and — as is so often the case — the good news of short-termism often doesn’t stay good for very long.

But hang on a second… rewind a bit to the Irish Glass Bottle site in Ringsend. Did I say “repossessed by the bank”? Let me rephrase that… it has been repossessed by the Irish government who have generously agreed to absorb pretty much all of the hundreds of billions of euro worth of debt injected into the Irish economy by a small number of greedy fools. The people responsible for creating our ghost developments and zombie hotels aren’t — it seems — the people responsible for dealing with the consequences. It’s been suggested that every person currently alive in Ireland will have to pay €2,000 per year for the next 70 years in order to clear the total liability that’s been shouldered by our Fianna Fáil / Green coalition government. And given that not all of us have another 70 years to live, we’ll be bequeathing a massive burden to the next couple of generations.

You’re welcome, kids.

As soon as this all sinks in — and for most, it really hasn’t yet — expect to see the next great wave of Irish emigration.

[Part 1] | [Part 2]

As we’ve already seen, we are approaching a singular discontinuity in human affairs. We’ve built an advanced technological civilisation that relies heavily upon a resource that will soon decline in availability. At the same time we developed an economic system predicated upon growth.

Economic growth is more or less synonymous with an increase in the total amount of work being carried out*. Energy is defined as “the ability to do work”. This physical definition is vital to our understanding of what happens in a world with progressively less net energy available for use… put simply; less work can be done. Feed a person 2,000 calories per day but force them to expend 2,100. Eventually they will die.

Similarly, if you have an economic system that depends upon growth for survival, a consistent and ongoing reduction in available energy will eventually kill it. The trick, therefore, is to develop a system that does not require constant growth. We need a radical shift in how we perceive economic data. Here, as we sit in the midst of a recession, we are bombarded by constant assurances from our politicians that they are working towards a “return to growth”. This is — almost universally — seen as a good thing. We should, however, be greeting these pronouncements with horror and anger. As unemployment rises we need to begin looking at ways to take advantage of a reduction in work rather than ways to reverse the trend. Put simply, with less energy available, there will be less work. This is not predicated upon an ideology or desired policy, but on the basic laws of physics. And we need to get used to it.

Instead of seeing a mental picture of an upward-trending graph when we hear the word “growth”, we should be seeing a mental picture of a malignant tumour.

The Problem of The Market

Like many of us, in my youth I tried on a number of different belief systems to see which one made most sense to me. I didn’t realise that’s what I was doing of course, so when I was a Roman Catholic… I was Catholic forever. Later on I found The One True Path and it was Marxism. A little while after that, libertarianism became the Obviously Right Way of viewing the world. And so it went. I have much sympathy for those who never went through this process, and who still find themselves stuck in the first rut they fell into, whether through indoctrination, laziness or a lack of imagination.

My free market capitalism days didn’t last very long though because they came along when I was already beginning to view the world in ecological terms. This isn’t so much a belief system as it is a mode of perception. These days I call it my “ecological filter” and it was very much in its infancy for me then. Even now, two decades later, I still find myself surprised at how it mutates and evolves, changing me and my beliefs as it does so. In fact, it’s probably only in the past six or seven years that I’ve even begun to understand this way of viewing things. It always felt right to me of course, but it wasn’t until I encountered the work of Gregory Bateson that I actually understood it.

Even back in the early days, however, even as I was professing a belief in it, I found myself recoiling from free market economics. It didn’t sit right with me. Part of that was as simple as aesthetics. A world with material profit at its heart seemed ugly and cold to me. I recall attending a lecture by a fairly renowned economist who responded to a question from the audience by suggesting that the way to protect endangered species was to ensure “they were more profitable alive than dead”. This complete willingness to bypass ethics and base life or death decisions on profit margins appalled me. Just like the Marxists I’d once flocked with, the free marketeers seemed content to apply economic models in situations which — to me at least — were completely inappropriate.

Economic value is but one way of measuring value. What’s more, it’s not even the most valuable.

The Essential Disconnect

Our modern economic system, however, has successfully employed a variety of strategies to ensure that all other measures of value become subservient to the economic model. The most effective of these strategies is what I call ‘The Essential Disconnect’. And nowhere is this more apparent than the palm-oil plantations of Indonesia.

Rising crude oil prices (i.e. market signals) coupled with perfectly legitimate concerns about Climate Change** led many governments to mandate the use of biofuels as a percentage of our total liquid fuels consumption. Despite the generally low percentages involved, this created a huge demand for vegetable-based oils (a low percentage of a massive number can often be quite large). In response to this demand, the major palm-oil exporters of which Indonesia is the largest began to ramp up production. This resulted in the kind of deforestation programme not seen since the height of the Brazillian slash-and-burn years. It is estimated, for instance, that the island of Sumatra — the largest in the Indonesian archipelago — will be entirely deforested within the next couple of years.

The Essential Disconnect is a twofold mechanism which both hides the consequences of palm oil production from those who consume it, and downplays the importance of those consequences for those who do hear about them. Few of us ever actually see the destruction of the Sumatran forests, and those who do are trapped by a worldview that fails to recognise the significance of that destruction. Our economic system effectively insulates the consumer from the consequences of their consumption.

Which is why a peak in global crude oil production coupled with a global free market in natural resources poses such a great threat to us. Rather than forcing us to re-evaluate our economic system, the first response provoked by peak oil in a free market will be to try to meet demand despite a drop in supply. So we don’t see a drop in private car use, we see the rapid deforestation of areas far away from the car owners. We don’t see huge investment in energy reduction measures, we see plans for a bunch of new nuclear power stations. “Consume less” becomes the last resort rather than the first.

Which wouldn’t be such a big deal if those first attempts to plug the supply gap weren’t so destructive. If they didn’t involve the suicidal destruction of the very environment of which we are an integral part. When the markets start to feel the pinch of peak oil they will react by demanding more palm oil, more coal burning, more uranium mining… As Bateson never tires of pointing out: “the organism that destroys its environment, destroys itself”.

Epilogue

This essay ended up being a good deal longer than I’d intended. Sorry about that. It started out as a response to a comment on a previous post and grew almost without me realising. I hope, however, that at least one person learns something they didn’t know about peak oil and resource depletion while reading it. Even if they don’t come to the same conclusions as I’ve reached, I can’t help but feel that the more people thinking about this issue, the better.

[Part 1] | [Part 2]

It’s been over for a few weeks now, and the general consensus seems to be that the Copenhagen Climate Change Summit achieved nothing worthwhile. In fact, the view that the summit actively damaged efforts to combat anthropogenic climate change seems more plausible than the idea that it helped in any way.

In an attempt to save face, a few Western governments have claimed limited success for the summit… the UK wheeled out John Prescott to insist that “some progress” had been made, while the Irish environment minister described it as “underwhelming” (both of which fall a long way short of an accurate assessment). Having spent a year preparing for a ten day summit which failed to achieve a single thing of real value, it was obviously rather impolitic to use phrases like “abject failure”, “sheer incompetence” or “couldn’t organise a piss up in a brewery”.

Environmental writers are split on who was primarily responsible for torpedoing the summit. Some blame China, others blame the USA. It seems rather obvious to me though, that neither the Chinese nor the US governments actually wanted an agreement that would do anything to limit their economic activity. So they were both happy for the summit to fail by being seen to disagree.

See, it’s really quite simple. Any nation or government that genuinely feels combating Climate Change by limiting emissions is more important than economic growth (hint: it is) would simply announce unilateral cuts and wait for the rest of the world to catch up. They go down in history as The Good Guys, and they get a head start on the rest of the planet when it comes to coping with peak oil. That no major industrial nation is doing this (hint: they’re not, carbon trading and PR campaigns notwithstanding) tells us that either (a) our governments don’t consider Climate Change to be as big a threat as a planned reduction in economic activity, which means they are idiots; or (b) they do consider it a bigger threat but don’t think they can sell it to their population, which means they are crap at their job.

Either way, why the hell do we put up with them?

The sheer magnitude of Copenhagen’s failure was brought home to me earlier this week by a headline over at the BBC. Copenhagen climate deal ‘satisfies’ Saudi Arabia, it read. That the world’s largest producer of crude oil is happy with the outcome of the summit pretty much tells you everything you need to know about it. Ultimately our failure to deal with Climate Change — which is what Copenhagen will long represent — is as perfect an example of our inability to live sustainably as can be imagined.

I’ve been reading a lot lately about something that appears to be getting little or no media coverage… namely the fact that last year saw some of the lowest crop yields in recent history. And that’s on a global scale. US yields in most staples fell dramatically, as did — from what we can tell, given the lack of transparency involved — yields in China.

South America and Europe were slightly down on expectations while Africa and Asia turned out well below predicted numbers. And Australia had a disastrous year. It’s worth noting that this covers both northern and southern hemispheres.

Now, it seems to me that these reductions in harvests across the entire globe may well be connected in some way to Climate Change (both in terms of the weather affecting crops and in terms of one of the half-arsed solutions we’ve pursued; agrofuels). But I don’t want to get into that particular argument right now, so let’s say for the sake of discussion that the low yields are entirely unconnected with global warming. The point is that whatever the cause, it has happened.

We all know that historically speaking, famine is (by and large) a product of inequitable distribution rather than actual shortages. “It’s politics rather than reality”, as a friend of mine used to say. And it’s probably true to suggest that the world would not face famine this year if every resident of the wealthy nations ate only what they genuinely needed, wasted little and allowed the surplus to be consumed by the world’s poor.

But that’s not very likely. Because the nature of food shortages, indeed the nature of food (the annual — occasionally bi-annual — production cycle coupled with the disparity between the length of time required to produce food; months; and the length of time we can go without the stuff before severe problems manifest; days) means that we tend not to become aware of the problem until it’s too late to deal with it. It’s little consolation to a hungry person in June that there may be enough wheat to make bread in September.

The indications from the articles I’ve been reading are that there will be widespread food shortages in 2010. I’ve been following this story as it developed (a long way below the mainstream media radar) throughout the last few months, and an excellent summation of the situation has recently been published here: 2010 Food Crisis for Dummies. I recommend you read it.

Yesterday over in London the New Labour government delivered a “pre-budget report”. This is essentially a way to test the reaction of the electorate to the contents of the budget without going through the hassle of leaking stuff through journalists. And despite the fact that opposition parties are wailing and gnashing their teeth based on claims that they’d make a 5% adjustment here and 4.2% adjustment there, there was ultimately little of note in Chancellor Darling’s speech. Aside from the one-off 50% windfall tax on bank bonuses, there will be little in the next UK budget that can be considered radical in any way (and, being a “one off”, that 50% tax isn’t even all that radical and will probably be avoided by many by deferring their bonus until next year… given that plenty of the recipients can afford to do so).

On the other hand, there was some genuinely tough decisions made here in Ireland yesterday as our own Finance Minister (Brian Lenihan) delivered our third unpopular budget of the year, building upon the tax rises and spending cuts already seen in 2009.

Predictably, the budget has met with a polarised response. Those on the left have roundly condemned it, while those on the right have lauded it (including the British conservatives, whose support always makes me suspicious of a thing). Equally predictably, such blanket condemnation / praise simplifies the issues involved to the point of meaninglessness. The economic mess that Ireland finds itself in right now is serious and it’s complex, and while I’m certainly not going to cut the government any slack — they’ve spent the past decade steering us up this creek after all — there is merit to some of Lenihan’s strategy.

The first thing to point out is that Ireland is a small nation. Our population is roughly the same as Greater Manchester, so our tax base is limited. The second thing to point out is that we are in serious debt. This is a direct result of the policies of the current government who oversaw the greatest period of prosperity in the history of the nation but failed to use it as an opportunity to safeguard the future. When George Osborne, the British Shadow Chancellor, hailed Ireland in 2006 as “as a shining example of the art of the possible in economic policy-making”, it was this short-sighted short-termism he was celebrating. Given that the British appear ready to hand the purse-strings to Osborne early next year, it seems they are unwilling or unable to learn from the mistakes of others. And the third vital point to make is that we are not in charge of our currency.

These three points — small tax base, large debt, no currency control — significantly limit the options for the Irish government in comparison with a nation like Britain. This is why we have little choice but to impose a series of painful budgets on the country. Having spent beyond our means for the past 10 years, it’s time to balance the books.

Incidentally, while membership of the Euro limits our options in certain ways, those who view this as an argument against the single currency are willfully ignoring the fact that our membership of the Euro probably protected the nation from bankruptcy and the banking sector from collapse last year. But that’s a discussion for another day.

Unemployment payments

Back with the budget, yesterday’s 4.1% cut in unemployment benefit effectively reduces the payments to the level they were about a year ago. Taken in tandem with the significant deflation Ireland is experiencing, our unemployed are still paid more than almost any other nation in the world. I’m not suggesting it’s a life of luxury being on the dole in Ireland — and those who claim it is are talking politicised nonsense — but it is a life above the breadline. Which is ultimately what our social welfare system is designed to provide. And I say that as a socialist.

That our nation of four million people, in significant debt, can nonetheless keep almost all of the 12.5% of us who are unemployed fed, housed and warm while still treating their illnesses and educating their children is to be applauded, not lambasted. Cutbacks will have to be made in already tight household budgets, certainly. But that’s what happens when the entire nation goes on a decade-long credit-fueled spending spree. An unemployed single parent in Ballymun may not have been responsible for that spending spree, but nor are they responsible for the creation of the welfare system. And the uncomfortable fact is that the large rises in dole and child benefit payments during the past few years represent a not-insignificant part of that spending spree.

Life is still better for the average unemployed Irish person than for the average unemployed American, Briton, Serb, Russian, Pole, Italian, Spaniard, Rwandan, Mexican or Greek. Yes, unemployed Scandanavians, Canadians and French probably have slightly higher standards of living — but we’re near the top of that particular table and should acknowledge that. Personally I figured that a 7-10% cut in welfare payments would have been possible without anyone going hungry or cold. That it’s been limited to 4.1% is as much political as it is economic (given the size of the unemployed voting bloc these days) and has meant cuts elsewhere that are — arguably — larger than is fair.

Public service pay cuts

And when I talk about unfair cuts, specifically, I’m talking about this. The public sector pay cuts represent the single largest spending cut in the budget and is being imposed upon workers who have already taken large pay cuts this year. It’s being met with satisfaction by the private sector and business leaders who seem to view it as somehow unjust that public sector workers have a modicum of job security. In reality, almost everyone in the public sector traded the opportunity to become wealthy for that job security. Business leaders can start complaining about public sector job security when they accept a government mandated pay cap. Until then, let me just point them towards Article 45 of our Constitution which makes it pretty clear that we’re a socialist nation at heart. I particularly like…

The State shall, in particular, direct its policy towards securing:
… ii. That the ownership and control of the material resources of the community may be so distributed amongst private individuals and the various classes as best to subserve the common good.

Excerpt from Article 45 of The Consitution of Ireland

And if you don’t like it, then I suggest moving to a country where wealth distribution isn’t enshrined in the constitution.

Part of this wealth distribution is our welfare system, our free health (means-tested, admittedly) and education. And part of it is the maintenance of a relatively large public sector in which jobs are secure.

And I’m not suggesting that public service workers should be immune from pay cuts. The money has to be found somewhere after all. But I don’t think it’s right that they should be bearing so much of the burden. Cut the welfare budget by another 4% and raise income tax by another 3%. Put up corporate tax by 2.5% (still giving us an extremely low rate). Whatever’s raised by those means should then be used to reduce the cuts experience by the public sector — who have already been hit hard this year.

The carbon tax

Predictably, I’m all for this one. The Greens may claim it as a victory, but I believe it’s more about Fianna Fáil looking for at least one new revenue stream that they can blame on somebody else. Doesn’t matter though; taxing fossil fuels is necessary and while this tax probably isn’t enough to produce significant reductions in their use, it’s a positive first step.

Transportation fuel prices have already been increased as a result, though home heating fuel is exempt until next spring (which is fair enough, as many low-income households will already have budgeted for their winter fuel, and any hike in home heating in the middle of December would run the risk of some going cold).

I think the car scrappage scheme (getting paid by the government to trade in your old car and buy a new one) is ultimately counter-productive. As an economic stimulus package I think it’s of dubious merit (we have no indigenous car manufacturing) and as a strategy to reduce emissions I think it’s extremely limited. The difference in emissions between an old car and a new one, after factoring in the carbon emitted by the car’s production and importation is unlikely to be worth the money being spent on the scheme. Far better to take that cash and invest it in renewable energy.

What I’d like to see, however, is a scrappage scheme that genuinely reduced carbon emissions. Citizen S proposed such a policy, and I think it would probably work. Essentially the government pays people to scrap their cars, but only if they agree not to buy another one for a given period of time. They’d voluntarily have their driving-licence suspended for (let’s say) two years; though they could return the scrappage fee should their circumstances change and they need to drive again.

The scrapped cars could be melted down and recycled as wind turbines.

Booze and fags and stuff

Strangely enough, the budget included a reduction in the rate of alcohol tax. The rationale behind this was to combat cross-border shopping. Large numbers of Irish people drive up north to buy cheaper booze (just as the British cross the channel for it). While there, they tend to spend money on other stuff as well and Lenihan sees this cross-border shopping as a significant drain on the treasury. I don’t know exactly how big a drain it is, but if — as he suggests — a reduction in alcohol tax will actually increase revenue by reducing cross-border traffic then it may make sense.

Domestic violence and addiction groups have complained that the reduction will have the effect of increasing alcohol consumption, and while that may be true, I suggest it’s probably quite marginal (much of the savings to be made on a pint or a short are being negated by pay cuts and tax increases).

Interestingly, the government decided not to increase the cost of tobacco products, claiming that doing so would be counter-productive as cigarette smuggling is already extremely prevalent and any further price increases would actually lower tax revenues from that source as yet more people sought out an illegal supply. I can’t comment on this as I don’t know how true that may be, but if it’s a fact that increasing cigarette tax would result in a decrease in revenue without substantially affecting the number of people smoking, then such an increase would indeed be silly. I don’t smoke tobacco any more so it’s all rather moot from my perspective.

But tobacco isn’t the only thing that can be smoked. One wonders how bad things would have to be before the Minister for Justice reforms drug policy and Lenihan announces a cannabis tax. Certainly such a move, if done sensitively and carefully, could be a boost to the treasury without creating any serious social problems. But I suspect the government doesn’t possess the sense, the bravery or the imagination to consider this idea.

In conclusion

Overall, I don’t think this budget was the disaster it’s being painted as by the Irish left. The public sector is being asked to bear an unfair proportion of the burden, and frankly that’s problematic. That said, this budget is unlikely to be the last round of belt-tightening that Ireland will face over the next year or so. Assuming the public sector has felt the worst of the cuts aimed at them (and I believe they probably have) then we’ll almost certainly see some kind of balance restored during the next budget. Welfare payments will come down by a smiliar amount to yesterday’s announcement, and taxes for corporations and high earners will surely rise by a few percentage points. The cannabis tax will doubtlessly remain a dream, though the carbon tax will surely rise slightly. We’ll also see a return to tobacco and alcohol increases (despite the rationale used this time round) given that we’re likely to still be in a deflationary situation by then and prices will have come down across the board.

Ultimately, Ireland needs to get back on its feet as soon as possible as I firmly believe we need to be investing heavily in renewable energy over the next ten years or so. And we can’t do that without first balancing the books. This budget, though imperfect and creating justifiable anger in the public sector, goes some way towards achieving that balance.

Contrary to what those involved would have us believe, investment banking is not actually that difficult a job. Certainly when compared with being a successful surgeon, nuclear physicist or civil engineer; the skill set required by banking is neither extensive nor terribly difficult to acquire.

Which isn’t to say “anyone could do it”. Along with the necessary skills, there are certain personality traits without which, a person would find investment banking extremely arduous. There’s a lot of politics involved, probably more than most jobs, and a person needs to be adept at navigating an upwards trajectory in a cut-throat environment. Also required is a willingness to work more hours than many people are comfortable with. Those tend to be difficult characteristics to acquire. Crucially however, those who already have them are far from being a rare breed.

So the reason successful bankers are paid enormous wages and even more enormous bonuses is entirely down to the nature of the industry they work in, rather than any inherent “star quality” they may possess as individuals. It isn’t due to the hard work of modern investment bankers… humble beginnings investing their pocket money in local community projects when they were twelve, and a few decades later finding their activities have grown into a multi-billion dollar bank. It’s because they got a job in the money industry and were successful at it.

Investment banking deals with huge sums of money. In fact, pretty much the entire purpose of the industry is to move large sums of money around. So when the bank takes a percentage profit on a given transaction, it’s a percentage of a large sum. And this needs to be stressed. They don’t earn huge amounts of money because what they do is extremely difficult (or even all that useful… but that’s a discussion for another day), but because there happen to be more zeroes on their Excel spreadsheets than on the spreadsheets of a bakery or a pub.

Which is why I find the outrage and arrogance of London’s investment bankers, when confronted with a windfall tax on their bonuses, to be so hilarious. They talk about how such a move will force “the stars” of the banking world to leave London for places without such “punitive tax rates”. The implication being that this will deal a serious blow to London’s — and by extension, Britain’s — economy.

I’m forced to wonder if this is just posturing on their part, or do they honestly believe such twaddle? It appears that earning huge salaries for several years has the ability to convince highly ambitious, semi-skilled sharks that they are indispensible. When the truth is that there’s a mass of similar people more than willing to do the same job for 50% of the cash (bearing in mind that 50% of Bob Diamond’s cumulative £20million bonus is more than enough to motivate most people).

I’m also wondering, given that this latest windfall tax will target the bonus payments of “tens of thousands of bankers”, exactly where they all intend to go? Are there really places in the world looking to hire tens of thousands of foreign bankers and pay them huge lightly-taxed bonuses? Is there truly a major lack of experienced investment bankers in New York, Frankfurt or Tokyo?

And even if a handful of banking “stars” do find work elsewhere, the idea that they are taking a unique skill set with them, and that nobody in London is capable of stepping into their shoes, is deluded beyond belief.

Hey y’all.

Yeah, I’ve been absent for a while and am just about to head off to sunny Montenegro for two weeks. So I’ll be absent a while longer. Expect a return to semi-regular blogging in September. Summer’s just not the time for it.

I’ve not been writing as much as I’d like, and the two major projects that I’m working on have kind of stalled. But I’ve had quite a lot of ideas for them once I get back up and running — and frankly I’ve been enjoying the downtime. There’s the occasional pang of guilt about not getting stuff done, but it is very occasional… an echo of my long dead work ethic (it nearly killed me, I responded in kind). Summer is for drifting. For enjoying the company of a lovely lady and reminding yourself that it’s OK to live life effortlessly for a while — if you’re lucky enough to be in a position to do so. Neither work nor leisure. Amen to that, brother.

That said, there’s been plenty happening lately that would have drawn remark had I been actively blogging. The fact that the entire economy over here could collapse at any moment has added a certain edge to Irish politics just now… to Irish life in general in fact. Politicians and business leaders are looking increasingly like they’re not getting enough sleep.

The nation is bankrupt though nobody wants to be the first to put it in those terms. The bank guarantees are now the only thing propping up the financial system… but the bank guarantees will bankrupt the country if actually called upon.

There’s a vague hope that if the government can engineer a ‘Yes’ vote in our second Lisbon referendum (far from a foregone conclusion) that the EU might — just might — step in and help bail us out. The EU firmly denies that’s even possible, let alone likely.

But in the corridors of power in Europe the Irish have a single last-gasp ace in the hole. The uneasy thought in the minds of Europe’s bankers that while Ireland has clearly been the architect of its own downfall, it is actually small enough to bail-out. And the cost of that bail-out might well be cheaper than the impact on the single currency and Central Bank of a member state collapsing. Because nobody’s really sure what it means for a member of the Euro to go bankrupt. That’s just got to be an event with all manner of unexpected consequences.

Whatever happens though, one thing is certain, for a very long time we will all be paying for the follies of the last decade. And for the bizarre decisions made by the banking and construction sectors.

Don’t get me wrong. The entire country was possessed by that rampant Celtic Tiger. Every sector was making bizarre decisions. 4 million people embarked upon a decade-long binge. A bonfire of over-consumption with everyone eager to fan the flames. Politicians, retailers, banks, the hospitality sector, the auto industry, the land-developers… just everyone!

But although everyone was possessed by the same madness, it’s the land developers and bankers who created the vast majority of the debt. Approving loans based upon valuations that bear all the hallmarks of having been arrived at after an afternoon of champagne and cocaine. Tens of billions of euros just disappeariing.

Sadly, my own solution isn’t really catching on…

Phase I: Round them all up. Yes, every banker, developer and politician… in fact anyone at all who was a “decision maker” during the past 10 years. They know who they are and frankly should have the decency to step forward.

Phase II: Stick ’em all in one of those ghostly half-full developments that sprung up around Dublin during the boom. Homes built for an imaginary profit not because anyone actually wanted them. Keep them comfortable, well-fed and let them have all the Sky Channels for free. But keep them there.

Phase III: Nationalise everything (starting with every asset currently owned by Shell Oil in this country. Honestly, the gall of that company, selling our gas back to us at a profit!)

Phase IV: Come round to my place and ask me what to do with it all, now it’s been nationalised. I imagine Phases I through III will take a few weeks. I’ll have worked out what to do next by then (hint: it’ll probably involve a combination of private property rights, socialised services and collectivised production… think Cuba via Stockholm with a heavy dash of Deep Ecology).

Anyhoo, enjoy what’s left of the summer.

I’m planning to.

Regular readers will know by now that I have some pretty definite views about the nature of capitalism and the society we have built from it. Views that are still quite a bit outside the mainstream (although it probably bears mentioning that the mainstream has begun its long, inexorable drift in my direction).

A few months ago I had a couple of meetings with an advisor / strategist for a very large financial institution. The credit crunch had just kicked off and mass panic was ensuing. At least, on the news it was. I myself never once saw anyone actively freaking out… not even the financial institution guy, and he was exactly the sort of person who was supposed to be screaming “Sell! Sell! For the love of God, Sell!” down the phone at some poor bugger in the midst of a heart-attack.

But instead he was taking leisurely lunches-slash-dinner-and-drinks with people like me in expensive Dublin restaurants. All in the interests of “canvassing alternative opinions”. Specifically, he was interested in my take on resource depletion / peak oil and what role — if any — it was playing in the current economic downturn.

I told him I had two responses. The first was that there was little or no link between the two. Simple, straight-forward and in the world of five-year futures and seven-year long-terms, undoubtedly true. Don’t get me wrong, there’s speculation to be done on the role that high oil prices may have played in accelerating the collapse, or upon the negative influence that continuing high prices will undoubtedly have upon the various infrastructure projects that governments have proposed as economic bail-outs. But the fact remains that this particular financial kerfuffle would be happening even if peak oil were not underway at this very moment (as I believe it is).

My second response was, I told him, a good deal more abstract. And it demanded a certain effort on his part. He’d read my thesis though, so was no stranger to the kind of effort I was talking about.

This more abstract response involved viewing the global financial system as one part of a wider ecology of systems. Of recognising economics as the imperfect model of reality that it is. And of getting his head around strange notions like the idea that phenomena as disparate as cancer, psychosis and unsustainability might actually be manifestations of a common tendency within complex systems. That they are, in a sense, the same phenomena. A disease of The Complex System, so to speak. And you can only begin to see this, and realise its significance, when you start viewing the world in terms of the network of interconnecting complex systems — the ecology of mind — that it is.

Pretty much the moment you’ve got your perception atuned to the ecology of mind idea, it becomes staggeringly obvious that the current financial collapse is properly viewed as a symptom of this systemic unsustainability / collective psychosis. It’s “an episode”. A dramatic one no doubt, and maybe it’s even the one that’ll deal the knock-out blow… the one where we whack our collective head against the metaphorical sink on that final plunge to the floor. But if it’s not, then it’s still a symptom of the sickness that will eventually kill western civilisation. The world of five-year futures and seven-year long-terms ignores that fact at its peril.

In which I lament, though acknowledge, the need for some level of authoritarianism.

For the past couple of years, a property developer has been applying to build a waste incinerator within sight of my home. Needless to say, I gave generously to the campaign against the Energy Recovery Facility (euphemism is required if one wants to name things without calling up mental pictures of them, as someone once observed). I didn’t get actively involved in the campaign however. For two specific reasons. Firstly, I was quite busy with other stuff. Secondly, I was confident that the planning application would be turned down. Which is not to say that the campaign didn’t need funding (planning applications need to be actively challenged, and even if your challenge is likely to be a success, it still requires time, effort and resources).

And as far as I could make out, that success was pretty much guaranteed. There wasn’t a single local councillor in favour of the plan, and every one of the local TDs and senators openly opposed it. As everyone knows, land rights and planning are at the very heart of local politics in Ireland. But with memories of the Mahon tribunal still fresh (it’s still technically in session, I believe), it’d be a complete fool who’d pass brown envelopes around a controversial project like this. And with bribery not an option just now, the decision had to be made on the merits of the project. As such, it was never going to pass. You could prove that on an etch-a-sketch, as the man said.

Firstly the location was absurd. Genuinely off-the-wall, could-only-possibly-have-been-considered-for-financial-reasons, absurd. The plan was to build the thing on top of one of the highest hills in the Rathcoole area. Rathcoole is right on the southwest edge of Dublin city. For a significant chunk of the year, the prevailing wind in Ireland comes from the southwest. Seriously, that one fact alone should tell you all you need to know about the project.

And there’s so much more. The road that would feed the incinerator is already one of the most congested commuter routes in the country. There’s a project underway to bring Dublin’s light rail system further out this direction specifically to reduce the amount of traffic on that road. You just won’t find anyone on the local planning board who’ll vote in favour of more traffic on the N7. Not without the aid of an extra-large brown envelope.

But on top of all that, it turns out the developer is an out-of-town consortium. And this is commuter belt. Prime land from a development standpoint. Luxury golf hotels and expensive residential developments. Property values are high, but dropping like everywhere else, and existing developers — those with large plots of land in the area and long-standing relationships with local politicians — don’t want to see those values drop further thanks to the presence of an incinerator.

So for those three reasons, it realistically stood no chance. But interestingly, all three of those objections are rooted, to varying degrees, in NIMBYism.

Not In My Back Yard (ism)

My own objection to the incinerator, in contrast, was based on a fourth reason; one that applies to all waste incinerators whatever their location. So even if positioned in what’s demonstrated to be the best location for such a facility, even if the local infrastructure can take the pressure and local property values positively soar as a result… even then, I think generating electricity from burning waste is a staggeringly bad idea.

In fact, it’s difficult for me to get across just how bad an idea I think it is without straying perilously close to caricature. To not merely create an industry that generates profit from burning waste, but suggest we rely upon that industry to provide basic services, is utterly psychotic. I can think of other words for it, but that’s the least rude. It is, just like any decision to build new nuclear power stations is, a statement to the effect that we are incapable or unwilling to act rationally in pursuit of a sustainable society and have decided, instead, to be active participants in a spectacular collapse.

By and large we are not aware that’s the statement we’re making, of course. A big bunch of unconscious processes, dontchaknow.

All the same, in the case of the Rathcoole incinerator, it is a happy coincidence that the objections of the local population were in accord with the Greater Good (if, as I’ve come to do, we define the “Greater Good” as those actions and decisions that promote a transition towards sustainability involving the least possible suffering). But what if they weren’t? What happens when the objections of the local population become obstacles towards that Greater Good? Do we accept that people have the right to continue acting unsustainably even if that behaviour dooms us all to the same fate? Do we allow the psychotic to thrash about, damaging himself and everyone around him? Or do we accept the need for restraint? And do we accept that need even when the psychotic is ourself?

Clearly we do accept that need. We just haven’t learnt to identify western consumerism as the huge episode of self-harm that it is.

In defence of NIMBYism, Merrick has this to say…

NIMBYism, like preaching to the converted, is an underrated activity.

To decry NIMBYs is absurd. We all have more concern for the things that affect our personal lives, we all care more about the things we see every day.

A friend of mine was campaigning against some nonsense from his council and knocked on doors in his street. One person said ‘you know your problem, you think you can change the world’.

My friend replied, ‘how big’s your world? Our street is a pretty big part of it. We can change that. If everyone did the same, then in the bigger sense we would change the world, too’.

Merrick, comments to a blog post

I appreciate the point being made. It’s the essence of all direct action politics in fact. But the central problem remains… this is only a valid strategy if we assume that the local concerns of individuals aren’t in contradiction with the needs of society as a whole. When everyone objects to an incinerator being built on their (metaphorical) street, then no incinerators get built and we can chalk one up for NIMBYism. But when nobody wants their view obstructed by wind farms… or nobody wants to abandon the luxury of their private car…

What then? I don’t accept that the demands of the masses; whether expressed democratically through the ballot box, or economically through their choice of soap powder; should be considered an adequate guide for our collective action. Especially when those demands can be shown to be reckless and destructive. A hundred years ago we had, in a sense, the luxury of basing our decisions upon ideological concerns. Our desires and demands could shape our behaviour because our environment could absorb anything we had the power to do. That’s just not the case any more. Thanks to technology and population growth, we have bumped up against the limits.

And because of this, it simply doesn’t matter what we want to do anymore. Our options have been curtailed, but we don’t quite appreciate this yet. Environmental limits will impose certain courses of action upon us. And these limits cannot be shifted by voting, nor by the most well-organised direct action campaign. We have reached the point where there are definite right and wrong ways to act, assuming our goal is anything remotely like the “Greater Good” I defined earlier.

Just as it is absurd to “decry NIMBYism” as a general principle (and it is absurd; I never suggested that, Merrick), so it’s absurd to assume it will always be a force pushing in the right direction. And when it pushes us further towards the brink…?

… well … as I said earlier… “in which I lament, though acknowledge, the need for some level of authoritarianism”.