China is now the world’s biggest economy

From Jeffrey Sachs:

According to the IMF, China’s GDP will be $17.6 trillion in 2014, outstripping US output of $17.4 trillion. Of course, because China’s population is more than four times larger, its per capita GDP, at $12,900, is still less than a quarter of the $54,700 recorded in the US, which highlights America’s much higher living standards.
In other U.S. – China news, the NSA is worried that China has the ability to crash the U.S. electrical grid with a cyber attack:
China and “one or two others” can shut down the U.S. electric grids and other critical infrastructure and is performing electronic reconnaissance on a regular basis, said NSA director Admiral Michael Rogers, testifying Thursday (Nov. 20) at a House Select Intelligence Committee hearing on U.S. efforts to combat cybersecurity.

habitat loss and animal welfare

Brian Czech makes the point that habitat loss causes a lot of animal suffering. I think this is almost certainly true, and sad. He mostly blames urbanization. I want to argue with that, because a compact, well-designed city should have a relatively small ecological footprint per person living in it, compared to people spread out over a more rural landscape. For example, the Amish way of farming actually is a big contributor to the water pollution destroying the Chesapeake Bay. If there are going to be 7 billion of us, or 10 billion, we can’t all live like the Amish or it would be an ecological disaster. Of course, it is true that the relatively low-impact lifestyle in the city is supported by an enormous rural base of agriculture, forestry, fishing, resource extraction, mining, and manufacturing that has a huge and growing ecological footprint. It’s possible to envision a world where we eventually turn the corner and manage to grow in quality without growing our physical footprint. But we are far from that, and natural ecosystems are certainly the big losers whether or not we are actually on the verge of destroying ourselves.

the fox guarding the financial hen house

On Huffington Post, Elizabeth Warren says we have a new fox guarding the hen house when it comes to financial regulation. Now, I have political opinions and will discuss them if asked, but that is not really the point of this blog. Here I am most interested in whether the financial reforms instituted after the 2007/8 meltdown are actually working, or whether the system is headed for an even more catastrophic meltdown. It’s not encouraging to think that the banks may be practically writing their own regulations:

Soon after they crashed the economy and got tens of billions of dollars in taxpayer bailouts, the biggest Wall Street banks started lobbying Congress to head off any serious financial regulation. Public Citizen and the Center for Responsive Politics found that in 2009 alone, the financial services sector employed 1,447 former federal employees to carry out their lobbying efforts, swarming all over Congress. And who were their top lobbyists? Members of Congress — in fact, 73 former Members of Congress.

According to a report by the Institute for America’s Future, by the following year, the six biggest banks employed 243 lobbyists who once worked in the federal government, including 33 who had worked as chiefs of staff for members of Congress and 54 who had worked as staffers for the banking oversight committees in the Senate or the House.

commodities fraud

The U.S. Senate Permanent Subcommittee on Investigations is investigating too-big-to-fail banks for fraud in manipulating commodities markets:

One focus for the subcommittee is the management of Detroit-area metal warehouses run by Metro Trade Services International, the largest U.S. warehouse company certified to store aluminum warranted by the London Metal Exchange for use in settling trades. Since Goldman bought Metro in 2010, Metro warehouses have accumulated up to 85 percent of the U.S. LME aluminum storage market.

Since Goldman took over the warehouses, the wait to withdraw LME-warranted metal has increased from about 40 days to more than 600 days, reducing aluminum availability and tripling the regional premium for storage and delivery costs.

The investigation revealed a number of previously unknown details about these deals: that Goldman’s warehouse company paid metal owners to engage in “merry-go-round” deals that shuttled metal from building to building without actually shipping aluminum out of Metro’s system; that the deals were approved by Metro’s board, which consisted entirely of Goldman employees; and that a Metro executive raised concerns internally about the appropriateness of such “queue management.”

Goldman didn’t just store aluminum; it was involved in massive trades of aluminum at the same time its warehouse operations were affecting aluminum availability, storage costs, and prices.

Even more fun than this, if you dig into the long report you can learn that Goldman Sachs is operating a “physical uranium business”, possibly without people qualified to do this:

Goldman’s involvement with physical uranium began with a 2008 proposal by GS Commodities to get into the business of trading physical and financial uranium products and processing rights.688 In 2009, Goldman purchased Nufcor, and expanded its business over the next five years, resulting in Goldman’s buying millions of pounds of uranium, controlling inventories of physical uranium at storage facilities in the United States and Europe, and becoming a long term supplier of physical uranium to nine utilities with nuclear power plants. Because no employees who conducted Nufcor’s business joined Goldman after the sale, Goldman employees ran the business.

This is great Bond villain material. Except Bond would probably be on the banks’ side, as long as they were just trying the rip the world off financially on behalf of the empire, rather than actually blow anything up.

Japan

According to the Economist, Japan’s economy is officially back in recession. I don’t fully understand these things, but I do find them interesting, so here’s my attempt at an explanation. They’re in a deflationary spiral, which means prices are falling, and people aren’t spending money because they expect prices to keep falling. It makes sense – if you want to buy something, and you expect it to be cheaper next week than it is this week, you will wait. It’s hard for an economy to grow under these circumstances. The government combats this by printing massive amounts of money and loaning it to itself, which it can then spend. Normally that would create massive inflation, but it doesn’t because no matter how much they print, everybody just sits on it and won’t spend it. If you think about it too much, you can’t help wondering whether money actually has any value or meaning under these conditions. It’s best if people don’t sit around wondering about that too much.

land economics

Here’s a long open article from Ecological Economics about studying the competition for land. Land exists at the intersection of economics and ecology, and it is conspicuously absent from a lot of economic thinking. It can be thought of as capital, in a sense, but obviously it is not manufactured capital. We can’t make more of it, but we can intensify our activities on a given piece of it (for example, more intense agriculture or taller buildings). Land is the obvious source of a lot of ecosystem services, but the value of those services tends to accrue regionally or globally rather than to the landowner. These are my own thoughts, but anyway here is the abstract:

Possible negative effects of increased competition for land include pressures on biodiversity, rising food prices and GHG emissions. However, neoclassical economists often highlight positive aspects of competition, e.g. increased efficiency and innovation. Competition for land occurs when several agents demand the same good or service produced from a limited area. It implies that when one agent acquires scarce resources from land, less resource is available for competing agents. The resource competed for is often not land but rather its function for biomass production, which may be supplanted by other inputs that raise yields. Increased competition may stimulate efficiency but negative environmental effects are likely in the absence of appropriate regulations. Competition between affluent countries with poor people in subsistence economies likely results in adverse social and development outcomes if not mitigated through effective policies. The socioecological metabolism approach is a framework to analyze land-related limits and functions in particular with respect to production and consumption of biomass and carbon sequestration. It can generate databases that consistently link land used with biomass flows which are useful in understanding interlinkages between different products and services and thereby help to analyze systemic feedbacks in the global land system.

smart, sustainable infrastructure

This long report is called Infrastructure Crisis, Sustainable Solutions: Rethinking Our Infrastructure Investment Strategies. They try to take all the talk about sustainable and smart infrastructure and boil it down to some actionable recommendations and goals. It’s worth a skim. Just to give some highlights, here are four goals they recommend for 2040:

  • Convert 95% of all types of energy use to renewables; fully deploy efficiency to cut demand 60%

  • Wring out water waste by 60%; integrate across water-wastewater-stormwater silos

  • Upgrade 75% of neighborhoods to“Very Walkable”; connect cities with high speed transit

  • Ensure 90% of products are managed by producers after use, and most ‘waste’ material is recovered by local industry

They talk about green infrastructure elsewhere in the text. Actually, it is now called “natural infrastructure”. People are probably a little burned out on the green buzzword. Some other interesting buzzwords they use are “sustainable asset management” and “performance-based infrastructure”.

more from Herman Daly on natural capital

Herman Daly reminds us that the concept of natural capital does not necessarily have to be measured in money:

it is worth clarifying that the word “capital” in its original non-monetary sense means “a stock or fund that yields a flow of useful goods or services into the future.” The word “capital” derives from “capita” meaning “heads,” referring to heads of cattle in a herd. The herd is the capital stock; the sustainable annual increase in the herd is the flow of useful goods or “income” yielded by the capital stock–all in physical, not monetary, terms. The same physical definition of natural capital applies to a forest that gives a sustainable yield of cut timber, or a fish population that yields a sustainable catch. This use of the term “natural capital” is based on the relations of physical stocks and flows, and is independent of prices and monetary valuation. Its main use has been to call attention to and oppose the unsustainable drawdown of natural capital that is falsely counted as income.

This is a long article that covers a pretty wide range of loosely related topics. But Herman Daly is always worth a read.

the U.S. and the middle east

I can’t fact check everything in this Tom Dispatch article, but even if only half of it were true, the U.S. military footprint and spending in the Middle East is eye opening.

Soon enough, that Rapid Deployment Force grew into the U.S. Central Command, which has now overseen three wars in Iraq (1991-2003, 2003-2011, 2014-); the war in Afghanistan and Pakistan (2001-); intervention in Lebanon (1982-1984); a series of smaller-scale attacks on Libya (1981, 1986, 1989, 2011); Afghanistan (1998) and Sudan (1998); and the “tanker war” with Iran (1987-1988), which led to the accidental downing of an Iranian civilian airliner, killing 290 passengers. Meanwhile, in Afghanistan during the 1980s, the CIA helped fund and orchestrate a major covert war against the Soviet Union by backing Osama Bin Laden and other extremist mujahidin. The command has also played a role in the drone war in Yemen (2002-) and both overt and covert warfare in Somalia (1992-1994, 2001-).