Brought back by popular request! Ask any question about geopolitics, broadly defined. We — and others reading the FM website — will attempt to answer it in the comments. All answers welcomed!
(1) Some quotes to start the debate
“There’s class warfare, all right, but it’s my class, the rich class, that’s making war, and we’re winning.”
Warren Buffett quoted by Stein in the New York Times of 26 November 2006
“Action comes first, and it is only when they have already suffered that they begin to think.”
― Thucydides, The Peloponnesian War
(2) So far 2,000,000 visitors served
This month the FM website had visitor number 2 million since opening in November 2007. We’ve had 3.2 million page views and 19,195 comments on our 1,995 posts. Our thanks to all who have read our material, and even more to those who have passed it on to a friend or colleague.
(3) Questions received so far
Click on the link to go directly to that thread. Please use the REPLY button when replying to a previous comment, to keep threads together.
- What can the US learn from the Switzerland’s economic, cultural, and poitical successes?
- Which of the Republican candidates do you see as best fit to lead the nation, from a geopolitical perspective?
- What of their pro-Israel policies of the Republican candidates?
- Will Iran use the oil weapon to disuade further attacks on them?
- The Arabs are moving to a better governement. What might this mean for Israel?
- Some right-wing propaganda seriously offered up, providing amusement.
- How and when did fear become the most powerful tool in American politics?
- Are all of our economic issues due to inflation?
I’ve always noticed that many people turn to Switzerland as an ideal nation — free of corruption, geographic isolation, the most competitive economy in the world (according to the WEF’s most recent report), and one of the best public sectors in the world. What can the United States learn from their economic, cultural, and poitical successes?
These comparative cultural questions are difficult to answer. It’s beyond my ability to answer. Perhaps one of our readers can comment on this.
There is one large geopolitical lesson the Swiss have for the world: the value of minding one’s own business.
I think it would be great if we could be like Switzerland, but I also wonder if their isolationist stance is really feasible for all nations. Haven’t they always depended on trade with other European nations, who in turn acquired their wealth through war, conquest and colonialism? Regardless, as the song says, it’s nice work if you can get it.
(1) “acquired their wealth through war, conquest and colonialism”
Only a small fraction of Europe’s current wealth came from colonialism, and the associated wars and conquest. The nations of Europe with few or no colonies are as rich per capita as those who had vast colonial empires. As for Europe’s internal wars, the attackers in every major war since 1648 has lost — many of which lost a lot.
(2) “I also wonder if their isolationist stance is really feasible for all nations”
I said “mind our own business”. That’s not necessarily isolationism. That’s the reflexive if moronic false choice offered to Americans: frequent foreign wars or isolationism. Many successful nations participate in international affairs without the need to wage frequent wars. The Nordic nations are other good examples. In fact since the collapse of the colonial empires, most developed nations have slashed their military budgets and concentrated on minding their own business.
” In fact since the collapse of the colonial empires, most developed nations have slashed their military budgets and concentrated on minding their own business.”
perhaps this is the case because NATO is led by America, and America in essence secures their defense. I am thinking for example that many European countries buy American jets. Sure they pay for them, but how much wasted money in the procurement process was paid by the US taxpayer?
“Switzerland as an ideal nation — […] geographic isolation”
Iceland is geographically isolated, Switzerland is not. In fact, it is surrounded by three of the most important EU nations (Italy, Germany, France), plus Austria and Liechtenstein. They are all obviously major trade partners, a large number of citizens from those countries work or even reside in Switzerland, and a network of important European roads, railways and airways criss-crosses Switzerland — which is constantly on the look-out for the economic and diplomatic moves of its neighbors and the EU.
Which means that, in this respect, it is possibly not a very relevant situation for the USA.
Update: scratch this comment. I misunderstood.
The comment above said: “The Nordic nations are other good examples”
Your reply: “Iceland is geographically isolated..”
That’s an odd rebuttal. The Nordic nations are Denmark, Finland, Norway, Sweden, and Iceland. Iceland is not only by far the smallest (GDP, area, population) but also a geographic outlier.My previous reply misunderstood what guest said. I’ll try again.
Guest: “Iceland is geographically isolated, Switzerland is not. … Which means that, in this respect, it is possibly not a very relevant situation for the USA.”
You are correct that Switzerland is not geographically isolated in terms of modern technology. But who is isolated in an age of ballastic weapons and atomic terrorism?
One test of Swiss geographic isolation compared to ours: do the Swiss worry more than we do about invasion by their neighbors? No.
A more relevant test of their grand strategy vs. ours: Do they worry more than us about attack by foreign terrorists, with their geographic proximity (with relatively open borders) to so many neighbors? No, they worry less. Why is that? Do jihadists hate the Swiss for their freedom?
“My previous reply misunderstood what guest said. I’ll try again.”
Let us see consider your points.
“do the Swiss worry more than we do about invasion by their neighbors? No.”
If you are thinking about immigration, then yes, the Swiss do worry a lot about immigration, including from their neighbors (lots of not always civil discussions about the “mass immigration from Germany” and the “cross-border commuters from France” “taking our jobs”), as shown by the success of anti-foreigners movements and popular initiatives in the past decade. After all, aliens represent over 22% of the resident population.
“Do they worry more than us about attack by foreign terrorists, with their geographic proximity (with relatively open borders) to so many neighbors? No, they worry less. Why is that?”
Switzerland is party to the Schengen treaty, hence its borders are _completely_ open to its neighbors. Which makes your question even more relevant.
They do worry about terrorists, but considerably less than the frenzied obsession in the USA. Probably because Switzerland is neutral, it is not member of the NATO, whichever involvement it has in the Afghan affair is limited (though heavily opposed by the extreme left and the largest right-wing party) and completely outside combat missions, it has a reputation of being ready to play a conciliatory role (failed “Geneva initiative” between Israelis and Palestinians, acting as go-between for Iran and the USA). It is also small fry. On the other hand, it has the reputation of being accommodating with the money from Arab dictatorships (Ben-Ali & co), it has a close, long-standing relation with US, Israeli and (apartheid-era) South-African intelligence and military services.
(1) I agree with what you say, but am unclear about its message. Are you agreeing with me that we have something to learn from Switzerland, or supporting your original thesis that “{Switzerland is} not a very relevant situation for the USA”.
(2) Immidration is different than invasion
I said: “do the Swiss worry more than we do about invasion by their neighbors? No.”
Your reply: “If you are thinking about immigration …”
We were discussing invasion, which is quite different than immigration. This conflation of war with other forms of gopolitics lies at the core of America’s dysfunctionality. Trade, the peaceful movement of people, and other forms of relationship are NOT all warfare. The world is not a battlefield.
I misunderstood your question — worrying about military invasions of Western European or North American countries seemed so preposterous to me that I thought you were talking about those figurative “invasions by foreigners” that anti-immigration circles are always talking about.
No, Switzerland is not worried about a military invasion from its neighbors.
Is anybody in the USA seriously worried that Canada or Mexico will invade the country?
“Are you agreeing with me that we have something to learn from Switzerland,”
As I said, Switzerland is small fry; it is well-connected, but landlocked; its economic weight, though important relative to its size, is not such a determining factor as the USA. The entire diplomatic and military architecture of several important regions of the world (arguably, of the world itself) depends on the USA. “Minding one’s business” is certainly a commendable resolution, except that for better or for worse, the USA is now tightly enmeshed in the world’s business.
I have difficulty to see what process could lead the USA to extricate itself from alliances, stop its intrusive policies and adopt a more “hands-off” stance in international politics — without bungling. And that without considering the aspects regarding the economic might and interventionism of the USA. Perhaps you can suggest some readings about this process. Difficult to learn from Switzerland about it either: the conditions that led that country to forgo international adventures were those from centuries ago and finalized in the aftermath of the Napoleonic wars.
“I have difficulty to see what process could lead the USA to extricate itself from alliances”
Isolationist thinking remains deeply embedded in the American psyche. We have swung from extreme isolationism to global policeman. The foreign policies of many successful nations show that there are intermediate policies that work quite well. Some point to Switzerland. I think the Nordic nations are better examples.
What could force the pendulum to swing back? That’s easy: great financial stress. The cost of our self-imposed role of global policeman — empire without the profits — constitutes an large drain on both Federal budget and the US capital account (foreign adventures require payment in foreign currency). A similar dynamic ended the British Empire, as bases were closed over a few decades to reduce the foreign exchange drain and save money.
Our Empire exists solely because the Federal government can borrow vast sums cheaply, include large amounts from foreigners. It finances our military adventures and massive military infrastructure, while we maintain almost no foreign exchange reserves (the size of which are a major constraint on the foreign activities of other nations). Last year we borrowed over a trillion dollars, almost 8% of GDP. This fiscal stimulus gave a blush of health to the economy. Note that military and intel activities, broadly defined, are almost a trillion dollars. The equivalence points to the eventual end of Empire.
“I have difficulty to see what process could lead the USA to extricate itself from alliances, stop its intrusive policies and adopt a more ‘hands-off’ stance in international politics — without bungling. ”
1. As previously stated: Europe should pay for its own defense. Same with Japan/Korea.
2. American intervention in many places is already “bungled”. Getting out of the middle east is one of the best examples of how the USA should stop bungling. By “getting out”, I mean, stop the long standing imperialist policies, and start supporting pro-democracy movements, where invited.
Under no circumstances should wars against Syria or Iran be allowed.
FM: “That’s easy: great financial stress.”
What you are saying is disheartening. The lower levels of the US society (families, municipalities and states) are already suffering from a harrowing financial stress. Your comment seems to imply that the water must reach the command deck (federal government and all associated lobbyists & co) before anything serious is attempted to steer the ship in a different direction? Is there really no other way?
Fubar: “Europe should pay for its own defense. Same with Japan/Korea.”
Agreed.
Fubar: “Getting out of the middle east is one of the best examples of how the USA should stop bungling.”
I should have been more explicit. 20th century history shows that when powers retreated from their imperialistic endeavors, they often (1) did not care much about leaving in good order or (2) made sure to leave behind some time bombs. Whether it is the UK in the Near East (Palestina, Iraq-Kuwait) and Middle East (Afghan-Pakistan border), Belgium in Africa (Congo and Rwanda/Burundi), Indonesia (Timor), Israel (Gaza), etc.
(1) “What you are saying is disheartening. Your comment seems to imply that the water must reach the command deck … before anything serious is attempted to steer the ship in a different direction?
Yes, that is disheartening. But the Great Law of Life is that Mother Nature does not care.
(2) “Is there really no other way?”
Yes, there is another path. We can rouse ourselves, clear our minds and stand again like free men and women. If we fail to do so we will be governed like sheep, for the benefit of the shepherd. The FM website serves only to help drive this process. Unfortunately the way to do so remains unclear to me. Experimentation continues, hoping to stumble upon something that works.
re: “20th century history shows that when powers retreated from their imperialistic endeavors, they often (1) did not care much about leaving in good order or (2) made sure to leave behind some time bombs.”
Excellent points, thanks. Simon Bolivar said that the countries he liberated were “ungovernable” because of tribal and class conflict, tyranny, ignorance, etc.
There are other examples where things went better after the departure of an imperial power. (China, Japan, Brasil?) Perhaps the best that can be hoped for at the current stage of civilization is something like South Africa, not exactly perfect, but better than it used to be?
Maybe people will learn something from watching tapes of Alan Greenspan blubbering in front of a Congressional hearing about how he was wrong to mindlessly follow Ayn Rand’s insane ideas? If Fox News could only be made to play those tapes every 15 minutes as a public service.
Which of the Republican candidates do you see as best fit to lead the nation, from a geopolitical perspective?
It’s said that the difference between bad and worse is more important than between good and better. But looking at the Repubican freak show pushes this to the breaking point.
They’re all a potential horror show for America, in my opinion. Unless, of course, they’re just lying. Saying what we want to hear. That would show good sense, exploiting our folly. Competent but unscrupulous leaders are the best fools can hope for.
What do you think of the Republican candidates’ pro-Israel policies (specifically Speaker Gingrich’s pledge to relocate our embassy in Israel to Jerusalem from Tel Aviv, and that the Palistinians are an invented people)?
In this we can only admire their honesty, opening telling us that they put the welfare of another nation ahead of America’s national interests.
It’s an odd choice since Israel seeks to grab as much Palestinian land as they can before they’re overwhelmed by demographics and the surrounding enemies they’ve worked so hard to cultivate.
I’ve just been reading a book called Operation Paperclip , alleging the move of German scientists to US after WW2 , in some cases rewriting their records if they were ardent Nazis ,involved in slave labour /atrocities. Alleging partial US sympathy towards Nazis , as the lesser of 2 evils- the bigger evil being seen as the Russians ; and reluctance to accept many dispossessed Europeans ,or sort out what they had owned ; a problem perhaps solved by the takeover of Palestine and funnelling them off there.Perhaps Israel was not really the Jewish Dream Acheived so much as a humane ‘final solution’ for Europe and the US .Perhaps , promises were made, deals struck , lies told to persuade them to go, once again , quietly .
Will Iran use the oil weapon to disuade an attack on them?
(1) Since Iran has already been repeatedly attacked, you must mean will Iran attempt to disuade further attacks.
(2) I know of no experts who believe that Iran will stage any large-scale attacks in response to the state of low-level warfare conducted against them.
They might refuse to sell oil to those who attack them, or those who support the attacks. That’s a natural and mild response to aggression, similar to that of the United States in response to Japan’s invasion of China. That’s a legitimate option, choosing with whom to trade, and not a “weapon.”
I see it as a weapon being that with peak oil and no real alternatives in case of an absence of Iranian oil that Iran could seriously damage the world economy due to surging prices of oil.
Trade not a weapon in any meaningful sense. While Americans seem increasingly unable to see the world except as a battlefield, the rest of the world does not share our insanity.
Also, we’re not at peak oil. We might not even be near peak oil. So it’s not a factor in the current Iranian situation.
Whirlwind, ou really need to change your information sources. You’d be better off with comic books than what you seem to read now. Comics often provide strong moral lessons, and you’re not likely to believe the fantasy you read in them.
If anyone uses anything as a weapon in regards to oil, it’s the western based petrol-companies, the Saudis and other actors on the oil market that are on ‘our’ side.
They are amongst the actors to gain the most from disruption to the middle eastern oil flow. They will be pumping up and selling the same amount of oil from their fields the same as if there was no brouhaha regarding Iran. Conflict is used as an explainer for the unprecedented crude prices we experience.
In other words, if you force other pies of the market, the punters have to pay more for yours, because there is no valid alternative to pie.
But we *ARE* at peak oil: “How you can tell that the peak oil debate is (almost) over“, Kurt Cobb, Resource Insights, 19 February 2012.
You win the “most foolish comment of the day” award.
(1) The author does not claim that peak oil is here. So your assertion is not supported by the article.
(2) The author presents no data about oil production or reserves. Here is his thesis:
This is entertainment for true believers. It’s a waste of time to read for anyone else. It’s sad that you believe this proves that we are peak oil.
No, we have reached the peak…
January Oil Supply, Early Warning – Risks to Civilization, 13 February 2012 — Opening:
Please stop this; you’re obviously quite hopeless on this subject. These graphs do not show that oil production has peaked; the author does not claim that oil production has peaked (this is also so for the previous article you cited as proving peak oil). From your posts it’s not apparent you understand the meaning of peak oil, or the different kinds of production peaking (eg, political, geological).
Egypt, Jordan, Syria and Lebanon have a dramatically growing population. Now they clearly have a movement towards a different (better?) governement. What this might entail in the Israel conflict? Shouldn’t we build a scenario based on a substantial GDP rise, say to 15.000$ GDP in this countries?
(1) “What this might entail in the Israel conflict?”
Representatives governments in the Arab nations will be hostile (at best) to Israel. In Egypt the swing may be both large and significant. Movement towards democracy puts Israel into peril.
(2) “Shouldn’t we build a scenario based on a substantial GDP rise, say to 15.000$ GDP in this countries?”
There is little correlation between representative government and economic growth. Look at Singapore, South Korea, and China. All with takeoff to rapid growth under non-rerepresentative governments.
On the other hand, after the fall of the Soviet Union, Russian government became more representative but with no faster growth. That came with a stronger central government under Putin.
Whatever the results of the Arab Spring, the short-term economic effect probably will be negative. As it has been in Egypt.
There are two sides to think about this. An example off the top of my head is Caterpillar Company in regards to their labor disputes, and new locations of their factories. CAT is having a labor dispute with their union in Canada. They have to build a new factory for new product. So they are going to build in Indiana and another in Georgia. Indiana is positioning itself as right to work, a nod to big manufacturers that costly labor disputes will not occur as often.
Another thing to think about is that most of Cat’s iron castings are made in Brazil. Globalization permits and even demands this. CO2 regulation ensures it. Starting a manufacturing company is difficulat in America compared to other countries, not all because of the cost of labor. In fact American labor is among the most productive in the world, so it would be great to establish yourself here. but their are so many lawyers and laws just waiting to take you out. It hurts the growing companies and it does hurt the workers. If you were going to start a manufacturing plant , would you do it in Cailfornia? It would be tough, almost crazy. You have to have a very highdollar product to make it worthwhile.
I don’t believe much of this is accurate.
(1) Changes in the manufacturing are a small factor in the increasing inequality of wealth and income. To mention just one reason, only 9% of non-farm employment is in the manufacturing sector (9 of 128 million).
(2) “Another thing to think about is that most of Cat’s iron castings are made in Brazil.”
You obviously have no idea about the difficulty of starting a business in a third world country like Brazil.
(3) “Globalization permits and even demands this. CO2 regulation ensures it.”
What CO2 regulations or taxes are there in the US? There are as of today none at the Federal or State level. The EPS regulations were stopped, at least temporarily.
Opening a business in Brazil – Why make it simple?“, The Economist, 21 January 2012 — “Setting up shop has just got easier. But not much”
“You obviously have no idea about the difficulty of starting a business in a third world country like Brazil.”
In fact I do run an international company. I do business in China, Thailand, and the USA– manufacturing in all 3 places. Perhaps Mexico soon as well. I also import products from Italy, Germany and Korea.
This my point: the class war is irrelevant to speak about without taking into account the many anti-business regulations in the States as well. Just think of the mass amounts of HR departments and personnel. They are all on the cost side of the equation. They are like drag coefficients representing the thousand cuts of laws that slow business down.
I think the big business actually enjoy these laws. They can hire as many lawyers as needed. They can employ huge HR departments. The more regs the better. It’s a way to keep out competition.
You’re asserting conservative propaganda. When called on it, you reply with bluster and more misinformation (ignoring the lies which you cannot explain away). As for your background, you blatently incorrect statements speak louder than you claimed expertise.
(1) Brazil
(a) You were the one citing Brazil as an example of a nation more easy to start businesses in than American. It’s false; Brazil is notorious for its barriers to starting businesses.
(b) More broadly, see the World Bank’s “ease of doing business” rankings. The United States is #4; Brazil is #126.
(2) “This my point: the class war is irrelevant to speak about without taking into account the many anti-business regulations in the States as well.”
You are just making stuff up. Our growing inequality is a intensely studied subject (there are many posts about it on the FM website); I’ve not seen any listing anti-biz regs as a significant cause.
(3) What happen to those US “CO2 regulations” you cited? Man up and admit you were wrong before writing another wordburst of misinformation.
(4) “I think the big business actually enjoy these laws.”
Yes, that’s the consensus opinion about regulation. It’s called “regulatory capture”, and has been intensely studied for at least 40 years.
My point was that it makes more sense to do the raw iron castings in Brazil. CAT has chosen to do so. I don’t see anything wrong with it per se but if we want to maximize employment in the states, we should look for ways to keep industries here. The connection here is that maximizing employment would maximize equality… a dubious claim I know.
It is correct that the CO2 regulation I claimed was more hot air than anything but the connection I had in mind was that developing nations are penalized less than developed nations, thus energy intensive application like castings can be favored in such developing countries.
Here we see a typical conservative at work. You spew conservative progpagnda. When disproven, you don’t admit the falsehoods, but instead pretend you were saying something else. But your words were quite clear, as was your claim of expertise.
“but the connection I had in mind was that developing nations are penalized less than developed nations”
Since your “connection” is false, why are you repeating it? Nobody is “penalized” in the US for CO2 emmissions, except in a very few local areas.
After thinking about it, my comment about Brazil and CO2 was unsupported. My post was mostly bull. FM smackdown indeed.
You have joined what is IMO an elite club: people who have admitted mistakes in the comments on the FM website. It’s a small club, despite the almost 20,000 comments.
It’s IMO the first step a person can take towards a new and better America. We all start with the “man in the mirror.”
Corporatism, or State Capitalism = socialism for the rich. The welfare state serves the interests of the corporate state. Big business has been buying politicians for over 100 years, and their Govt-sponsored, pro-corporate anti-competitive schemes are as remarkable as they are out of view of most of the public. The manipulation of credit by large, corporate banks seriously disadvantages businesses that are not large corporations, especially those that do not primarily service large corporations. Again, as FM points out, the deregulation of profits made by big banks has been bad for non-corporate businesses.
The classic example is small family farms near large urban areas. In that case, property taxes that support inefficient public school systems (and result in suburban sprawl) are deadly. With robotics and global trade making blue collar jobs scarce, an aggressive reform movement to build a small farm economy based on local/sustainable economics (and jobs for men) would seem to be a necessity.
In recent years, and oil company family from New England (Bush supporters) purchased a national dairy corporation (including organic products). they engaged in silly tactics with small family farmers, diverting incentives away from the farmers and toward environmental lobbyists. They purchased a regional dairy processor in northern california, and proceeded to stop buying bulk milk from a bunch of small farmers on the absurd excuse that their milk, which they had been selling to the original producer (family owned business) for decades, was of unacceptable quality due to minor variations in butterfat content from the smaller herds.
International controls of dairy prices are absurd, and play a significant role in distorting market forces, to the benefit of large corporate interests. Government intervention in business confers huge advantages to large corporations, at the expense of small businesses. This can stifle innovation. It is destructive of culture and local wisdom.
How and when did fear become the most powerful tool in American politics? Emperor Sidious would be proud…
A weak and foolish people must be governed, as they cannot govern themselves. Obviously reason is a in an ineffective means for folks such as us. Appeals to fear and greed are the easy and effective tools for such a task.
But hasn’t fear always been used? Maybe it would be better to find examples when it wasn’t used by the elites as leverage.
As far as the modern post WWII order, look into topics such as the Truman Doctrine (Sen. Arthur Vandenberg advised Truman he would have to “scare the hell out of the country”), George Kennan’s “long telegram,” and the Finletter Commission.
What is the use of fear in the Long Telegram, and the Finletter Commission? Except in the sense of the cold war being driven by fear of the Soviet Union and worldwide communism.
To say that implies that the fear was irrational. Was it? We don’t speak of rational responses to dangers being driven by “fear”. As in I’d fix the cracks in the dam, but that’d be giving in to fear.
…I forgot about NSC-68. Probably a bunch of others too.
I should have been more clear that the Truman Doctrine, Long Telegram, and Finletter Commission are topics which help to explain the politics of the time and where the modern pattern originated. The Finletter Commission, for example, was notable for its recommendation of massive increases in defense spending and the establishment of a permanent and well-funded defense industrial base. All of the witnesses who testified stood to gain from that conclusion (cited from Wayne Biddle’s “Barons of the Sky”). Seems familiar, doesn’t it?
That’s the essence of my attempt to answer Hoyticus’ question. The pattern, for good or ill, starts there.
Got it! Sad but true. Thanks for the explanation.
A conservative friend of mine keeps telling me all of our economic issues (in the United States I mean) is due to “inflation” (IE, lack of jobs, deficits, etc.) How true (or false?) is this?
He’s a victim of the massive conservative propaganda campaign. Inflation is far below that during the Reagan Administration. We are suffering from deleveraging of the private sector, the last stages of the post-WWII debt supercycle. As described at length in many posts on the FM website.
FM is correct. “deleveraging of the private sector” means that assets whose values were vastly bloated, such as housing, have to be reduced substantially. The losses have to be absorbed. Big banks and corporations will try to shift the cost to the tax payers.
I personally would characterize the system that allowed a relatively small number of people to become vastly enriched by what happened to be a massive scam. Wall Street was turned into a casino. Viciously predatory, anti-worker, corporate behavior was/is tolerated because of “conservative” propaganda.
Although in general, inflation is not a factor, there are certain instances where inflation does act as a retarding force in the economy. Per the AGC {link to their websiite} (and BLS), materials inflation (excluding drywall and lumber) in the construction industry is greater than the rise in what contractors can charge for finished construction. (The competition is brutal in the industry. Many contractor bids will not make any profit but will merely allow the company to keep operating. At this rate, the smaller contractors will be driven under. Then only the big boys will remain and prices will rise.)
Also, there is the matter of fuel/oil costs (which contribute heavily to materials inflation). Although still lower than costs before the financial crisis, it is alarming to see prices this high during the first quarter of the year (which is a record). Money into the gas tank is money that cannot be spent elsewhere.
Let’s take a step back before getting lost in the details.
The question dealt with the hysterical fear of inflation, a technique used by conservatives to control and mobilize their flock.
By the way, rising materials prices are not inflation. Inflation is a rise in the general price level. Sector prices (eg, food, energy, materials, labor) are always rising and falling, dependent on their specific supply/demand balances — independent of the overall monetary factors that drive inflation.
Note also that people whine about their rising input prices. They never complain about their falling input prices (eg, labor, technology) — or about their rising output prices (eg, profit margins). This gives the news a highly misleading cast.
You are correct it is not inflation (CPI), but rising PPI for inputs to a specific sector, If greater than the general inflation rate it is considered escalation. However, the construction industry employs a lot of people, directly and indirectly (it is a bad time to graduate with a degree in architecture) so it does impact the greater economy. (But it surely is not hyperinflation.)
Rising materials costs can be corrected with contract clauses that adjust final payout based on the appropriate materials index. Of course, only large “owners” who do repeat business with the industry and therefore have a vested interest in maintaining a competitive environment over the long term would care to do so.
I also concede that the AGC would not complain a bit about the opposite situation.
Regarding inputs:
Per ENR, skilled labor costs in the construction industry are rising, It’s kind of counterintuitive really, until one looks behind the numbers. This is because, in an industry with about double the official rate of unemployment, only the best are still employed (and employers want to keep them), and because young people are not going into the trades as apprentices (so journeymen are doing work that would have once been done by apprentices).
It is difficult to say if technology inputs are lower in that industry because there is a lot of surplus equipment domestically, but with rising demand from countries like China.
http://enr.construction.com/economics/
I have no idea what point you are attempting to make. You’re giving a very misleading picture — on all levels.
First, the articles you cite look at only short-term trends. Construction costs are down substantially from their 2006-2008 peaks. No surprise as so many costs (labor, lumber, oi) are down from their peaks.
Also you ignore broader factors:
1. Turner Construction Cost Index: unlike ENR I do not know how it is measured, so I have no opinion. It may be from the owners point of view.
2. Caltrans: They are paying for Put-in-place construction, not the actual material. State DOTs do not pay for time, equipment, materials but rather the finished product. (My industry is Heavy Civil/Transportation, which is why it is important to me.) It says nothing about whether or not contractors are making money. A search will find State DOTs are concerned about this trend for reasons already cited. If this trend continues only Kiewit etc, will be left standing and the tax payer will be screwed on public works spending as the bid boys will basically dictate prices for owners.
3. If one is on the edge, then any cost that cannot be passed on is bad news. It is bad for the overall economy is a industry that pays living wage jobs is going down the tubes. (It is also bad for fixing infrastructure, such a replacing 100+ year old water pipes etc.)
4. The construction industry is more important that many other sectors because it is a large employer of often well paying jobs (some of the last one can find that involves manual labor), and it often leads the economy out of a slump. It will not do so here. (The reasons for heavy civil are largely political. The stimulus was not well crafted–the requirement for shovel ready projects meant that only projects that are generally short term were funded. A better one would make matters better rather than just support stasis.) Historically, the industry is also a great springboard for people who want to start their own companies.
5. The lack of demand for construction indicates the greater economy is sick.
Also, materials costs have been rising for years, except for their slump about the time of the financial crisis as caused by demand destruction, then started rising again. The put-in-place indexes don’t tell the whole story
The point is that if one only looked at escalation as it personally impacts them, then one might confuse it with inflation and believe that is the basis of the economy’s ills. I agree with you that it is not, but that does not make such a belief necessarily right wing propaganda. It is an error of focus.
I still have no idea what point are attempting to make. You ignore the data I show and points I raise, while making various and conflicting observations. Your thesis about rising costs being a serious factor for the industry is false. It’s daft to focus on only material costs rather than total costs. Furthermore, overall construction costs remain substantially below peak levels (although recently with a small blip up) — and affect the industry far less than the low level of demand.
“agree with you that it is not, but that does not make such a belief necessarily right wing propaganda. It is an error of focus.”
While Republicans may applaud your imaginative defense of their massive propaganda barrage (sustained since 2006, despite continued false forecasts), it’s totally false. The major figures at work know quite well what they are doing, both in terms of misrepresenting the situation and how their efforts support their political goals. There are hundreds of articles by expert economists and political scientists dissecting this subject.
We’re done here.
A follow-up to my previous comment
People often report micro-data — stories about a small sector of the economy — under the mistaken belief that this tells us something about the whole economy. It does not. Construction of single-family homes is weak. Construction of apartments is strong. Vehicle manufacturing is growing stronger. Oil and gas exploration is sizilling hot.
This is why we must rely on aggregate data to see the full picture. Otherwise we’re lost amidst the dots, unable to see the forest for the trees.
Re peak oil: Some good contributions on this topic can be found on the Econbrowser blog in the energy subsection, I point you to the contributions of J.J. Brown, who supports his thesis with data which have not been proven wrong yet: {Comment posted by Jeffrey J. Brown to “Net Exports, Exports, Real Exchange Rates and Manufacturing” by Menzie Chinn, 2 February 2012 — begin of citation/
What thesis by Prof Brown? Neither Chen’s post now Brown’s comment even mention peak oil. There is nothing in his comment showing signs of peak oil. It’s just another period where a combination of slow economic growth and increased energy efficiency result in flat or even falling oil demand. As I have explained so many times:
Similarly oil prices troughted at aprox $12/b in 1998, since rising to roughly $100/b now. That price shock has driven a massive increase in efficiency AND reduced usage (eg, miles driven in America). The combination of that with the great recession in the developed nations resulted in flat global “oil” consumption.
Note that looking forward ALL experts agree that peak oil is coming. Their forecasts differ as to when it arrives, no surprise considering the limited data about reserves and production capacity — and the unknowns about future economic growth.
Some believe it will arrive soon. Perhaps when the Saudi’s excess capacity is utilized, since they have said they could increase production capacity but will not do so. Estimates range from a few years to 20 years, clustering in the next decade. Too bad we’ve wasted so much time, making almost no efforts to prepare.
Sorry, here you miss the point:
1) The available amount of crude for western nations have decreased since 2005, because
a) stagnating production,
b) increased domsetic consumption of producers,
c) increasing demand of Cina and India. More precise, an increasing number of citizens who are able to pay a higher price than the average citizen in developed western countries.
2) No substitutes are available to compensate for this decrease.
Therefore, Brown (in other of his contributions) points to the fact that for western nations we have a “peak oil” since 2005. Here Brown is quite clear. The question is, if we can reduce our demand as fast as the available amount of crude shrinks.
I do not think that a definition for “peak oil” that excludes price of production and other factors and only focuses on known reserves is useful.
Absurd. Neither of the articles you cite claim peak oil is here because it is not here. You are just making stuff up (eg, your point about “substitutes” is false). Nothing like that analysis appears in the articles you cite.
Flat consumption forces flat production, since production must equal demand (storage of liquid fuels is limited and expensive). Peak oil is the reverse: production limiting consumption. Peak oil production is a global event; production in specific regions has been peaking since 1970 (eg, Texas).
Why has consumption been roughly flat since 2005 (although it is probably growing again)?
We had flat oil consumption from 1979 – 1983; that was not peak oil either.
A simple test for arrival of peak oil: you will see lots and lots of articles by experts saying “peak oil is here.” It’s one of the most closely studied subjects of our time, and will not arrived unannounced. You might not need to wait long, since many experts forecast peak oil during the next five years (note its more of process than a point; we should speak of “peaking”).
With all due respect, FM, I think you’re overlooking two rather important factors in the Peak Oil equation…
1) The Saudi Arabian nation came into being solely as a result of petroleum and its economy to this day remains heavily dependent on petroleum (which is not surprising, given that statistics from our own government indicate Saudi Arabia has the largest proven oil reserves on the planet) — it’s estimated that at least 45% of their budget revenues, 55% of their GDP, and 90% of their export revenues come from petroleum.
2) The House of Saud continues to rule Saudi Arabia largely at the sufferance of the Saudi people — a majority of whom were still nomadic as recently as the 1960’s — and only because the people have been gaining some benefit from oil profits (although not even remotely as much as the House of Saud has). However, the House of Saud also knows that if those oil profits were to decrease significantly or vanish altogether tomorrow, the economy would suffer tremendously and there is a very good chance that this would result in a revolution — especially in the wake of the Arab Spring — since they would no longer be able to use oil profits to keep the people pacified. Knowing this, it seems reasonable to conclude that if — or more likely when — the Saudis are unable to increase production any further, they will deny it as long as they possibly can simply because admitting that they are at peak would quite possibly trigger a conservation effort around the globe. (As a side note, it seems relevant to point out that the second biggest shareholder in News Corp, the parent company of FOX News, is in fact a Saudi prince by name of Alwaleed bin Talal. Given his position, is it possible that he wields some influence over what FOX News has to say about AGW/climate change? I think you have to acknowledge that it’s very possible.)
The late Matthew Simmons — a Peak Oil activist who received an MBA from Harvard, spent twenty-five years running his own investment bank (SImmons & Co.) specializing in the energy industry, and who was a known member of Cheney’s mysterious Energy Task Force — was of the firm belief that the Saudis are deliberately overestimating their oil reserves. (Again, the most probable reason for this is the fact that their economy and the position of the House of Saud are both so dependent on petroleum.) He also stated on numerous occasions that when Saudi Arabia peaks — since Peak Oil is almost certainly a question of “when” rather than “if” — then the world is officially at peak. If Simmons is right — and although he has been proven wrong on occasion, there is at least some reason to believe that he knew what he was talking about — then the possibility can’t be entirely ruled out that the reason why the Saudis refuse to increase production is simply because they know they can’t (especially since Saudi Aramco apparently acknowledged in 2006 that its mature oil fields are beginning to decline) but also know they can’t afford to admit it. Unfortunately, this is what tends to happen when you put all your eggs in one basket…
Of course, as you yourself said, what makes this worrisome is the fact that the United States — the world’s biggest consumer of petroleum — is still making very little effort to prepare despite the Hirsch Report from our own Department of Energy which stated that we would need to begin making the transition to alternate fuels within twenty years of the Hubbert Peak in order to minimize the impact upon our society — but that this potentially might be shortened to ten years with moderate impact provided that consumers, businesses, and governments are prepared to make a determined effort to conserve. However, if we keep doing what we’re doing now — which is little or nothing — then we can expect the impacts to be severe and possibly last over a decade. Considering how dependent our agriculture alone is on petroleum, all the way from beginning (tilling the soil) to end (transportation), this is frankly unacceptable.
Bluestocking,
(1) None of the things you discuss are of the slightest relevance to the question “did peak oil happen in 2005” (when consumption stopped growing, probably temporarily)?
(2) Matthew Simmons was a fount of misinformation, as has been shown many times on this website and elsewhere. That he is considered an authority by the Peak Oil community shows their defective grasp on both facts and logic. To take just two examples. His book Twilight in the Desert was published in 2005, making large bold claims about short-term Saudi output. The passage of seven years has disproved many of his claims. Second, his claims about the Gulf oil spill were outlandish, bizarre.
Peak oil: Please take a little bit time to read other contributions of Brown in the energy threads. Everything I claim – and what is labled as absurd by you – is there. Really interesting is one of the last of Brown’s contributions: /citation A long time Peak Oil Critic, John Hofmeister, former CEO of Shell Oil Company, continues to develop a much more nuanced outlook for global oil supplies. He was on CNBC this morning. John Hofmeister link (2/21/12): Gas to Hit $5 By Summer? — Hofmeister:
/citation
Like ALL your previous comments, this means nothing. You have not shown a single thing which even suggests peak oil has arrived.
(1) It’s obvious you not only know little about peak oil, you do not understand what is evidence. Statements by a former oil exec mean nothing by themselves. Was Hofmeister a technical expert, such as geologist? His degree was political science (bio here). Also, now he’s heads the advocacy group “Citizens for Affordable Energy”, accouts for his statements — but don’t give them any validity.
(2) Please include the URL to Borwn’s quotes you cite. Without that it looks like you are making stuff up. It’s not our role to search in order to verify what you say. And in this case Google does not show the Brown quote you give.
“Please take a little bit time to read other contributions of Brown in the energy threads. Everything I claim – and what is labled as absurd by you – is there.”
This is an example of what looks like making stuff up. Nothing in the post Ulenspiegel1965 cited (to which Brown posted a comment) supports his assertion that the 2005-2011? flat consumption shows that peak oil has arrived. It the classic flim flam of pointing into the distance and saying trust me — the proof is out, there somewhere.
For those who are new to the peak oil issue, here’s the brief:
Sitting back a bit and thinking about long term economics, quite a few Middle Eastern countries could actually have pretty positive futures if they play their cards right.
In the end companies will locate where the workforces are related to their markets, all other things being equal. For many products (not all of course) shipping costs are a minor part of the equation. What matters more than the absolute cost is the ease and speed of transport. Getting a workforce that is skilled and at a reasonable price is the name of the game these days. If you can find them in a geographic ‘hot spot’ (with good transport to major markets) then they will attract investment.
This was the ‘secret’ of the Irish Economic miracle (before they self destructed with a ponzi housing boom and the Govt taking on all the liabilities of the private banks of course). Educated workforce right next to Europe, with the right incentives corporations flocked there. At one point Ireland created more software than the US (yes really).
Now with the collapse of technical education ( trades, physics, engineering, chemistry, etc) in many Western nations (e.g. US,UK, etc) and the rise (and rise) of education in a high proportion of young people in places like Egypt and Iran means that they could start to get more investment.
Now take Egypt, if (and it is an if) they finally get some sort of more representational Govt. One that starts to put in more capital investment friendly policies, they actually stand a good chance of getting manufacturing investment from Europe. Geography is better than Asia (= faster/cheaper transport and better communication), much of the skilled places in Europe are aging and some others have deskilled. Therefore significant investment in those areas could pay off.
Iran is the interesting case. Very skilled workforce, geographic nirvana. If everyone just forgot about oil and gas for a moment and looked at it as a potential major manufacturing/transport/trans shipping/etc hub for Europe/Asia/ME/etc ….
So Volkswagons made in Egypt, aerospace components from Iran? New British nuclear reactors made by Iranian engineers (paid with money borrowed from China)? Barring ‘the great miscalculation/disaster’ World economics in 20 years might be quite a bit different from what we see now (note that 20 years ago China was a joke economically and Germany was almost bankrupt from its reunification efforts).
“Now with the collapse of technical education ( trades, physics, engineering, chemistry, etc) in many Western nations (e.g. US,UK, etc)”
What collapse? Evidence?
K-12 is a disaster for technical trades. K-12 is run by women who have no interest in helping men from lower-income backgrounds learn trade skills and become independent of welfare state politics and social engineering programs.
Higher education, colleges/universities are ok. They are complicit in immigration scams, bringing in tech workers from India/etc.under “Student” Visas, that end up working cheaper than american workers in high tech industries in the USA.
From the outside, or superficially, this makes Universities look good (supporting jobs training and R&D for high tech), but in reality tax dollars are being used to take jobs away from americans.
How do you see the current unrest in Syria ending? Will the Assad regime be cast down like Mubarak in Egypt and Qaddafi in Libya? Will there be a western intervention like Libya?
Good question, but I have not followed the situation.
Syria = North Korea ? (A problem that defies good solutions.)
What are the similarities between Syria and North Korea, other than the gross ones that apply to many nations. Inherited tyrants; US does not like them.