By Bruce Herring
Much ado lately in local press and other spheres concerning the future of Grass Valley. Citizens, elected officials, print journalists, bloggers, and other characters have bandied about a variety of notions. At issue: What is, what has, and what will really revitalize Grass Valley? It has been suggested the new Dorsey interchange is the true “silver bullet.” It has been suggested a new “Lifestyle Mall” at the interchange is the key to our future, complete with a big or at least a medium box. “It’s what the people want.”
Not long ago the buzz was the re-opening of the Idaho-Maryland Mine. Before that it was Loma Rica, other annexations, the shopping malls, and heck even the freeway itself. Brilliant idea that freeway, and convenient. Of course great swaths of private and commercial property were condemned, Nevada City lost the old gazebo, and Wolf Creek sentenced to run underground through tunnels and culverts for much of its downtown reach. A bit further back are the mines themselves, the mills, Lake Olympia, the Narrow Gauge Railroad, and …
Except for a portion of the original Loma Rica plan, these ideas and “improvements” – while visionary to varying degrees – are all based on quite conventional nineteenth or twentieth century thought. All have brought, or will bring some gain. All have tradeoffs. Everything does.
Several recent comments aim to push the conversation toward a 21st century framework. One suggests we are leaving history out of the equation. Others call for a comprehensive outlook instead of the usual piece-meal strategy. Steve Frisch of the Sierra Business Council goes one step further to suggest folks today “Want to live, work, shop and be entertained in the place they live; they want to walk and ride bikes; they want access to trails and open space; they want affordable starter housing for working people because young people can’t afford the single family residential American dream anymore; people crave authenticity and a sense of place.”
Two things. One, the City of Grass Valley has secured a grant to pursue a Comprehensive Economic Development Plan. I am told by high level city staffers that a multi-year series of public meetings will commence sometime later this year to do just that. Fabulous.
Two. Yes, a comprehensive outlook with a broad perspective is indeed a welcome idea. But the discourse must also include the age-old concept of the Commons. To be sure Grass Valley and Western Nevada County need to continue moving forward economically. But as Mr. Frisch suggests, we should do so authentically and with a renewed sense of “place.”
The common thread through Grass Valley is Wolf Creek. Like most “commons” it has been virtually invisible, neglected, used, and abused since the get-go in the 1850s. Commons in general are taken for granted and not valued in the complex accounting of GDP and “economic growth.” And yet in their wisdom the Grass Valley City Council unanimously approved a Conceptual Plan for a Wolf Creek Parkway in 2006. A Wolf Creek Trail is mentioned in city documents as early as 1999 and is included in the Downtown Strategic Plan.
Little or nothing has happened in the last eight years to move the concept forward. The time to do so is now. The Wolf Creek Parkway can and should stand as the centerpiece of any Comprehensive Economic Development Plan. Yes for the creek’s sake, but more importantly for OURS. We need a healthy visible accessible creek to revitalize ourselves. A place to walk, a place to bike, a place to just sit by moving water will provide a profound sense of place and connection to the natural world. It will help each of us feel good about our town. Citizens and visitors alike will benefit from the shared values derived from Wolf Creek, the “Real Gold in Grass Valley.”
Urban river and creek restoration has boosted property values and economic vitality in San Luis Obispo, Napa, Santa Rosa, and Tempe, AZ. Plans are underway for a major rehabilitation of the Los Angeles River. Freeway interchanges, bridges, and places to shop locally are indeed essential to our vitality, as would be high speed internet access. But the Wolf Creek Parkway will make a statement and put Grass Valley “on the map.” The Parkway epitomizes a bold move into 21st Century thinking.
Let the conversation continue. For additional information please visit the website of the Wolf Creek Community Alliance.
Bruce Herring is a former whitewater rafting guide for O.A.R.S., running in the 70s and 80s on the Stanislaus, Tuolumne, Merced, American, Rogue, San Juan, Tatshenshini, and Grand Canyon. He spent ten years teaching and as Principal of Bitney Springs High School in Grass Valley, stepping aside in 2013. He currently serves as the Managing Director for A&B Associates, and volunteers for the Wolf Creek Community Alliance. See his blog at “Steward’s Log.”
Reprinted with permission from TomDispatch.com
The Empire Strikes Back
How Wall Street Has Turned Housing Into a Dangerous Get-Rich-Quick Scheme — Again
You can hardly turn on the television or open a newspaper without hearing about the nation’s impressive, much celebrated housing recovery. Home prices are rising! New construction has started! The crisis is over! Yet beneath the fanfare, a whole new get-rich-quick scheme is brewing.
Over the last year and a half, Wall Street hedge funds and private equity firms have quietly amassed an unprecedented rental empire, snapping up Queen Anne Victorians in Atlanta, brick-faced bungalows in Chicago, Spanish revivals in Phoenix. In total, these deep-pocketed investors have bought more than 200,000 cheap, mostly foreclosed houses in cities hardest hit by the economic meltdown.
Wall Street’s foreclosure crisis, which began in late 2007 and forced more than 10 million people from their homes, has created a paradoxical problem. Millions of evicted Americans need a safe place to live, even as millions of vacant, bank-owned houses are blighting neighborhoods and spurring a rise in crime. Lucky for us, Wall Street has devised a solution: It’s going to rent these foreclosed houses back to us. In the process, it’s devised a new form of securitization that could cause this whole plan to blow up — again.
Since the buying frenzy began, no company has picked up more houses than the Blackstone Group, the largest private equity firm in the world. Using a subsidiary company, Invitation Homes, Blackstone has grabbed houses at foreclosure auctions, through local brokers, and in bulk purchases directly from banks the same way a regular person might stock up on toilet paper from Costco.
In one move, it bought 1,400 houses in Atlanta in a single day. As of November, Blackstone had spent $7.5 billion to buy 40,000 mostly foreclosed houses across the country. That’s a spending rate of $100 million a week since October 2012. It recently announced plans to take the business international, beginning in foreclosure-ravaged Spain.
Few outside the finance industry have heard of Blackstone. Yet today, it’s the largest owner of single-family rental homes in the nation — and of a whole lot of other things, too. It owns part or all of the Hilton Hotel chain, Southern Cross Healthcare, Houghton Mifflin publishing house, the Weather Channel, Sea World, the arts and crafts chain Michael’s, Orangina, and dozens of other companies.
Blackstone manages more than $210 billion in assets, according to its 2012 Securities and Exchange Commission annual filing. It’s also a public company with a list of institutional owners that reads like a who’s who of companies recently implicated in lawsuits over the mortgage crisis, including Morgan Stanley, Citigroup, Deutsche Bank, UBS, Bank of America, Goldman Sachs, and of course JP Morgan Chase, which just settled a lawsuit with the Department of Justice over its risky and often illegal mortgage practices, agreeing to pay an unprecedented $13 billion fine.
In other words, if Blackstone makes money by capitalizing on the housing crisis, all these other Wall Street banks — generally regarded as the main culprits in creating the conditions that led to the foreclosure crisis in the first place — make money too.
An All-Cash Goliath
In neighborhoods across the country, many residents didn’t have to know what Blackstone was to realize that things were going seriously wrong.
Last year, Mark Alston, a real estate broker in Los Angeles, began noticing something strange happening. Home prices were rising. And they were rising fast — up 20% between October 2012 and the same month this year. In a normal market, rising home prices would mean increased demand from homebuyers. But here was the unnerving thing: the homeownership rate was dropping, the first sign for Alston that the market was somehow out of whack.
The second sign was the buyers themselves.
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About 5% of Blackstone’s properties, approximately 2,000 houses, are located in the Charlotte metro area. Of those, just under 1,000 (pictured above) are in Mecklenberg County, the city’s center. (Map by Anthony Giancatarino, research by Symone New.)
“I went two years without selling to a black family, and that wasn’t for lack of trying,” says Alston, whose business is concentrated in inner-city neighborhoods where the majority of residents are African American and Hispanic. Instead, all his buyers — every last one of them — were besuited businessmen. And weirder yet, they were all paying in cash.
Between 2005 and 2009, the mortgage crisis, fueled by racially discriminatorylending practices, destroyed 53% of African American wealth and 66% of Hispanic wealth, figures that stagger the imagination. As a result, it’s safe to say that few blacks or Hispanics today are buying homes outright, in cash. Blackstone, on the other hand, doesn’t have a problem fronting the money, given its $3.6 billion credit line arranged by Deutsche Bank. This money has allowed it to outbid families who have to secure traditional financing. It’s also paved the way for the company to purchase a lot of homes very quickly, shocking local markets and driving prices up in a way that pushes even more families out of the game.
“You can’t compete with a company that’s betting on speculative future value when they’re playing with cash,” says Alston. “It’s almost like they planned this.”
In hindsight, it’s clear that the Great Recession fueled a terrific wealth and asset transfer away from ordinary Americans and to financial institutions. During that crisis, Americans lost trillions of dollars of household wealth when housing prices crashed, while banks seized about five million homes. But what’s just beginning to emerge is how, as in the recession years, the recovery itself continues to drive the process of transferring wealth and power from the bottom to the top.
From 2009-2012, the top 1% of Americans captured 95% of income gains. Now, as the housing market rebounds, billions of dollars in recovered housing wealth are flowing straight to Wall Street instead of to families and communities. Since spring 2012, just at the time when Blackstone began buying foreclosed homes in bulk, an estimated $88 billion of housing wealth accumulation has gone straight to banks or institutional investors as a result of their residential property holdings, according to an analysis by TomDispatch. And it’s a number that’s likely to just keep growing.
“Institutional investors are siphoning the wealth and the ability for wealth accumulation out of underserved communities,” says Henry Wade, founder of the Arizona Association of Real Estate Brokers.
But buying homes cheap and then waiting for them to appreciate in value isn’t the only way Blackstone is making money on this deal. It wants your rental payment, too.
Wall Street’s rental empire is entirely new. The single-family rental industry used to be the bailiwick of small-time mom-and-pop operations. But what makes this moment unprecedented is the financial alchemy that Blackstone added. In November, after many months of hype, Blackstone released history’s first rated bond backed by securitized rental payments. And once investors tripped over themselves in a rush to get it, Blackstone’s competitors announced that they, too, would develop similar securities as soon as possible.
Depending on whom you ask, the idea of bundling rental payments and selling them off to investors is either a natural evolution of the finance industry or a fire-breathing chimera.
“This is a new frontier,” comments Ted Weinstein, a consultant in the real-estate-owned homes industry for 30 years. “It’s something I never really would have dreamt of.”
However, to anyone who went through the 2008 mortgage-backed-security crisis, this new territory will sound strangely familiar.
“It’s just like a residential mortgage-backed security,” said one hedge-fund investor whose company does business with Blackstone. When asked why the public should expect these securities to be safe, given the fact that risky mortgage-backed securities caused the 2008 collapse, he responded, “Trust me.”
For Blackstone, at least, the logic is simple. The company wants money upfront to purchase more cheap, foreclosed homes before prices rise. So it’s joined forces with JP Morgan, Credit Suisse, and Deutsche Bank to bundle the rental payments of 3,207 single-family houses and sell this bond to investors with mortgages on the underlying houses offered as collateral. This is, of course, just a test case for what could become a whole new industry of rental-backed securities.
Many major Wall Street banks are involved in the deal, according to a copy of the private pitch documents Blackstone sent to potential investors on October 31st, which was reviewed by TomDispatch. Deutsche Bank, JP Morgan, and Credit Suisse are helping market the bond. Wells Fargo is the certificate administrator. Midland Loan Services, a subsidiary of PNC Bank, is the loan servicer. (By the way, Deutsche Bank, JP Morgan Chase, Wells Fargo, and PNC Bank are all members of another clique: the list of banks foreclosing on the most families in 2013.)
According to interviews with economists, industry insiders, and housing activists, people are more or less holding their collective breath, hoping that what looks like a duck, swims like a duck, and quacks like a duck won’t crash the economy the same way the last flock of ducks did.
“You kind of just hope they know what they’re doing,” says Dean Baker, an economist with the Center for Economic and Policy Research. “That they have provisions for turnover and vacancies. But have they done that? Have they taken the appropriate care? I certainly wouldn’t count on it.” The cash flow analysis in the documents sent to investors assumes that 95% of these homes will be rented at all times, at an average monthly rent of $1,312. It’s an occupancy rate that real estate professionals describe as ambitious.
There’s one significant way, however, in which this kind of security differs from its mortgage-backed counterpart. When banks repossess mortgaged homes as collateral, there is at least the assumption (often incorrect due to botched or falsified paperwork from the banks) that the homeowner has, indeed, defaulted on her mortgage. In this case, however, if a single home-rental bond blows up, thousands of families could be evicted, whether or not they ever missed a single rental payment.
“We could well end up in that situation where you get a lot of people getting evicted… not because the tenants have fallen behind but because the landlordshave fallen behind,” says Baker.
Bugs in Blackstone’s Housing Dreams
Whether these new securities are safe may boil down to the simple question of whether Blackstone proves to be a good property manager. Decent management practices will ensure high occupancy rates, predictable turnover, and increased investor confidence. Bad management will create complaints, investigations, and vacancies, all of which will increase the likelihood that Blackstone won’t have the cash flow to pay investors back.
If you ask CaDonna Porter, a tenant in one of Blackstone’s Invitation Homes properties in a suburb outside Atlanta, property management is exactly the skill that Blackstone lacks. “If I could shorten my lease — I signed a two-year lease — I definitely would,” says Porter.
The cockroaches and fat water bugs were the first problem in the Invitation Homes rental that she and her children moved into in September. Porter repeatedly filed online maintenance requests that were canceled without anyone coming to investigate the infestation. She called the company’s repairs hotline. No one answered.
The second problem arrived in an email with the subject line marked “URGENT.” Invitation Homes had failed to withdraw part of Porter’s November payment from her bank account, prompting the company to demand that she deliver the remaining payment in person, via certified funds, by five p.m. the following day or incur “the additional legal fee of $200 and dispossessory,” according to email correspondences reviewed by TomDispatch.
Porter took off from work to deliver the money order in person, only to receive an email saying that the payment had been rejected because it didn’t include the $200 late fee and an additional $75 insufficient funds fee. What followed were a maddening string of emails that recall the fraught and often fraudulent interactions between homeowners and mortgage-servicing companies. Invitation Homes repeatedly threatened to file for eviction unless Porter paid various penalty fees. She repeatedly asked the company to simply accept her month’s payment and leave her alone.
“I felt really harassed. I felt it was very unjust,” says Porter. She ultimately wrote that she would seek legal counsel, which caused Invitation Homes to immediately agree to accept the payment as “a one-time courtesy.”
Porter is still frustrated by the experience — and by the continued presence of the cockroaches. (“I put in another request today about the bugs, which will probably be canceled again.”)
A recent Huffington Post investigation and dozens of online reviews written by Invitation Homes tenants echo Porter’s frustrations. Many said maintenance requests went unanswered, while others complained that their spiffed-up houses actually had underlying structural issues.
There’s also at least one documented case of Blackstone moving into murkier legal territory. This fall, the Orlando, Florida, branch of Invitation Homes appeared to mail forged eviction notices to a homeowner named Francisco Molina, according to the Orlando Sentinel. Delivered in letter-sized manila envelopes, the fake notices claimed that an eviction had been filed against Molina in court, although the city confirmed otherwise. The kicker is that Invitation Homes didn’t even have the right to evict Molina, legally or otherwise. Blackstone’s purchase of the house had been reversed months earlier, but the company had lost track of that information.
The Great Recession of 2016?
These anecdotal stories about Invitation Homes being quick to evict tenants may prove to be the trend rather than the exception, given Blackstone’s underlying business model. Securitizing rental payments creates an intense pressure on the company to ensure that the monthly checks keep flowing. For renters, that may mean you either pay on the first of the month every month, or you’re out.
Although Blackstone has issued only one rental-payment security so far, it already seems to be putting this strict protocol into place. In Charlotte, North Carolina, for example, the company has filed eviction proceedings against a full 10% of its renters, according to a report by the Charlotte Observer.
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About 9% of Blackstone’s properties, approximately 3,600 houses, are located in the Phoenix metro area. Most are in low- to middle-income neighborhoods. (Map by Anthony Giancatarino, research by Jose Taveras.)
Forty thousand homes add up to only a small percentage of the total national housing stock. Yet in the cities Blackstone has targeted most aggressively, the concentration of its properties is staggering. In Phoenix, Arizona, some neighborhoods have at least one, if not two or three, Blackstone-owned homes on just about every block.
This inundation has some concerned that the private equity giant, perhaps in conjunction with other institutional investors, will exercise undue influence over regional markets, pushing up rental prices because of a lack of competition. The biggest concern among many ordinary Americans, however, should be that, not too many years from now, this whole rental empire and its hot new class of securities might fail, sending the economy into an all-too-familiar tailspin.
“You’re allowing Wall Street to control a significant sector of single-family housing,” said Michael Donley, a resident of Chicago who has been investigating Blackstone’s rapidly expanding presence in his neighborhood. “But is it sustainable?” he wondered. “It could all collapse in 2016, and you’ll be worse off than in 2008.”
Laura Gottesdiener is a journalist and the author of A Dream Foreclosed: Black America and the Fight for a Place to Call Home, published in August by Zuccotti Park Press. She is an editor for Waging Nonviolence and has written for Rolling Stone, Ms., Playboy, the Huffington Post, and other publications. She lived and worked in the People’s Kitchen during the occupation of Zuccotti Park. This is her second TomDispatch piece.
[Note: Special thanks to Symone New and Jose Taveras for conducting the difficult research to locate Blackstone-owned properties. Special thanks also to Anthony Giancatarino for turning this data into beautiful maps.]
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Copyright 2013 Laura Gottesdiener
Reprinted with permission from Tomdispatch.com
By Bob Dreyfuss
Put in context, the simultaneous raids in Libya and Somalia last month, targeting an alleged al-Qaeda fugitive and an alleged kingpin of the al-Shabab Islamist movement, were less a sign of America’s awesome might than two minor exceptions that proved an emerging rule: namely, that the power, prestige, and influence of the United States in the broader Middle East and its ability to shape events there is in a death spiral.
Twelve years after the U.S. invaded Afghanistan to topple the Taliban and a decade after the misguided invasion of Iraq — both designed to consolidate and expand America’s regional clout by removing adversaries — Washington’s actual standing in country after country, including its chief allies in the region, has never been weaker. Though President Obama can order raids virtually anywhere using Special Operations forces, and though he can strike willy-nilly in targeted killing actions by calling in the Predator and Reaper drones, he has become the Rodney Dangerfield of the Middle East. Not only does no one there respect the United States, but no one really fears it, either — and increasingly, no one pays it any mind at all.
There are plenty of reasons why America’s previously unchallenged hegemony in the Middle East is in free fall. The disastrous invasions of Afghanistan and Iraq generated anti-American fervor in the streets and in the elites. America’s economic crisis since 2008 has convinced many that the United States no longer has the wherewithal to sustain an imperial presence. The Arab Spring, for all its ups and downs, has challenged the status quo everywhere, leading to enormous uncertainty while empowering political forces unwilling to march in lockstep with Washington. In addition, oil-consuming nations like China and India have become more engaged with their suppliers, including Saudi Arabia, Iran, and Iraq. The result: throughout the region, things are fast becoming unglued for the United States.
Its two closest allies, Israel and Saudi Arabia, are sullenly hostile, routinely ignore Obama’s advice, and openly oppose American policies. Iraq and Afghanistan, one formerly occupied and one about to be evacuated, are led, respectively, by Prime Minister Nouri al-Maliki, an inflexible sectarian Shiite closely tied to Iran, and President Hamid Karzai, a corrupt, mercurial leader who periodically threatens to join the Taliban. In Egypt, three successive regimes — those of President Hosni Mubarak, Mohammad Morsi of the Muslim Brotherhood, and the chieftains of the July 2013 military coup — have insouciantly flouted U.S. wishes.
Turkey, ostensibly a NATO ally but led by a quirky Islamist, is miffed over Obama’s back-and-forth policy in Syria and has shocked the U.S. by deciding to buy a non-NATO-compatible missile defense system from China. Libya, Somalia, and Yemen have little or no government at all. They have essentially devolved into a mosaic of armed gangs, many implacably opposed to the United States.
This downward spiral has hardly escaped attention. In a recent address to the National Council on U.S.-Arab Relations, Chas Freeman, the former American ambassador to Saudi Arabia, described it in some detail. “We have lost intellectual command and practical control of the many situations unfolding there,” said Freeman, whose nomination by Obama in 2009 to serve as head of the National Intelligence Council was shot down by the Israel Lobby. “We must acknowledge the reality that we no longer have or can expect to have the clout we once did in the region.”
In an editorial on October 29th, the New York Times ruefully concluded: “It is not every day that America finds itself facing open rebellion from its allies, yet that is what is happening with Saudi Arabia, Turkey, and Israel.” And in a front-page story on the administration’s internal deliberations, the Times’s Mark Landler reported that, over the summer, the White House had decided to scale back its role in the Middle East because many objectives “lie outside [its] reach,” and henceforth would adopt a “more modest strategy” in the region.
Perhaps the most profound irony embedded in Washington’s current predicament is this: Iran, for decades the supposed epicenter of anti-Americanism in the region, is the country where the United States has perhaps its last opportunity to salvage its position. If Washington and Tehran can negotiate a détente — and it’s a big if, given the domestic political power of hawks in both countries — that accord might go a long way toward stabilizing Washington’s regional credibility.
Debacle in Syria
Let’s begin our survey of America’s Greater Middle Eastern fecklessness with Exhibit A: Syria. It is there, where a movement to oust President Bashar al-Assad devolved into a civil war, that the United States has demonstrated its utter inability to guide events. Back in the summer of 2011 — at the very dawn of the conflict — Obama demanded that Assad step down. There was only one problem: short of an Iraq-style invasion of Syria, he had no power to make that happen. Assad promptly called his bluff, escalated the conflict, and rallied support from Russia and Iran. Obama’s clarion call for his resignation only made things worse by convincing Syrian rebels that the United States would come to their aid.
A year later, Obama drew a “red line” in the sand, suggesting that any use of chemical weapons by Syrian forces would precipitate a U.S. military response. Again Assad ignored him, and many hundreds of civilians were gassed to death in multiple uses of the dreaded weapons.
The crowning catastrophe of Obama’s Syria policy came when he threatened a devastating strike on Assad’s military facilities using Tomahawk cruise missiles and other weaponry. Instead of finding himself leading a George W. Bush-style “coalition of the willing” with domestic support, Obama watched as allies scattered, including the usually reliable British and the Arab League. At home, political support was nearly nil and evaporated from there. Polls showed Americans overwhelmingly opposed to a war with or attack on Syria.
When, in desperation, the president appealed to Congress for a resolution to authorize the use of military force against that country, the White House found (to its surprise) that Congress, which normally rubber-stamps such proposals, would have none of it. Paralyzed, reluctant to choose between backing down and striking Syria by presidential fiat, Obama was rescued in humiliating fashion by a proposal from Syria’s chief ally, Russia, to dismantle and destroy that country’s chemical weapons arsenal.
Adding insult to injury, as Secretary of State John Kerry scrambles to organize a long-postponed peace conference in Geneva aimed at reaching a political settlement of the civil war, he is faced with a sad paradox: while the Syrian government has agreed to attend the Geneva meeting, also sponsored by Russia, America’s allies, the anti-Assad rebels, have flatly refused to go.
Laughingstock in Egypt
Don’t think for a second that Washington’s ineffectiveness stops with the ongoing Syrian fiasco.
Next door, in a country whose government was installed by the United States after the 2003 invasion, the Obama administration notoriously failed to convince the Iraqis to allow even a small contingent of American troops to remain there past 2011. Since then, that country has moved ever more firmly into Iran’s orbit and has virtually broken with Washington over Syria.
Since the start of the civil war in Syria, Shiite-led Iraq has joined Shiite Iran in supporting Assad, whose ruling minority Alawite sect is an offshoot of Shiism. There have been widespread reports that pro-Assad Iraqi Shiite militias are traveling to Syria, presumably with the support or at least acquiescence of the government. IgnoringWashington’s entreaties, it has also allowed Iran to conduct a virtual Berlin Airlift-style aerial resupply effort for Syria’s armed forces through Iraqi air space. Last month, in an appearance before the Council on Foreign Relations in New York during the United Nations General Assembly session, Iraqi Foreign Minister Hoshyar Zebari undiplomatically warned Obama that his government stands against the U.S. decision — taken in a secret presidential finding in April and only made public last summer — to provide arms to Syria’s rebels. (“We oppose providing military assistance to any [Syrian] rebel groups.”)
Meanwhile, Washington is also flailing in its policy toward Egypt, where the Obama administration has been singularly hapless. In a rare feat, it has managed to anger and alienate every conceivable faction in that politically divided country. In July, when Egypt’s military ousted President Mohammad Morsi and violently clamped down on the Muslim Brotherhood, the Obama administration made itself look ridiculous to Egyptians (and to the rest of the Middle East) by refusing to call what happened a coup d’état, since under U.S. law that would have meant suspending aid to the Egyptian military.
As it happened, however, American aid figured little in the calculations of Egypt’s new military leaders. The reason was simple enough: Saudi Arabia and the Arab states of the Persian Gulf, bitter opponents of the Morsi government, applauded the coup and poured at least $12 billion in cash into the country’s near-empty coffers. In the end, making no one happy, the administration tried to split the difference: Obama declared that he would suspend the delivery of some big-ticket military items like Apache attack helicopters, Harpoon missiles, M1-A1 tank parts, and F-16 fighter planes, but let other aid to the military continue, including counterterrorism assistance and the sale of border security items. Such a split decision only served to underscore the administration’s lack of leverage in Cairo. Meanwhile, there are reports that Egypt’s new rulers may turn to Russia for arms in open defiance of a horrified Washington’s wishes.
Saudi and Israeli Punching Bag
The most surprising defection from the pro-American coalition in the Middle East is, however, Saudi Arabia. In part, that kingdom’s erratic behavior may result from a growing awareness among its ultraconservative, kleptocratic princelings that they face an increasingly uncertain future. Christopher Davidson’s new book, After the Sheikhs: The Coming Collapse of the Gulf Monarchies, outlines the many pressures building on the country.
One significant cause of instability, claims Davidson, is the “existence of substantial Western military bases on the Arabian Peninsula, [which are considered] an affront to Islam and to national sovereignty.” For decades, such an American military presence in the region provided a security blanket for the Saudi royals, making the country a virtual U.S. protectorate. Now, amid the turmoil that has followed the war in Iraq, the Arab Spring, and the rise of an assertive Iran, Saudi Arabia isn’t sure which way to turn, or whether the United States is friend or foe.
Since 2003, the Saudi rulers have found themselves increasingly unhappy with American policy. Riyadh, the area’s chief Sunni power, was apoplectic when the United States toppled Iraq’s Sunni leader Saddam Hussein and allowed Iran to vastly increase its influence in Baghdad. In 2011, the Saudi royal family blamed Washington for not doing more to prevent the collapse of the conservative and pro-Saudi Mubarak government in Egypt.
Now, the Saudis are on the verge of a complete break over Washington’s policies toward Syria and Iran. As the chief backers of the rebels in Syria, they were dismayed when Obama chose not to bomb military sites around Damascus. Because it views Iran through the lens of a regional Sunni-Shiite struggle for dominance, it is no less dismayed by the possible emergence of a U.S.-Iran accord from renewed negotiations over that country’s nuclear program.
To express its pique, its foreign minister abruptly canceled his address to the United Nations General Assembly in September, shocking U.N. members. Then, adding insult to injury, Saudi Arabia turned down a prestigious seat on the Security Council, a post for which it had long campaigned. “Upset at President Barack Obama’s policies on Iran and Syria,” reported Reuters, “members of Saudi Arabia’s ruling family are threatening a rift with the United States that could take the alliance between Washington and the kingdom to its lowest point in years.”
That news service quoted Saudi Arabia’s intelligence chief, Prince Bandar bin Sultan, as saying that his country was on the verge of a “major shift” in its relations with the U.S. Former head of Saudi intelligence Prince Turki al-Faisal lambasted America’s Syria policy this way: “The current charade of international control over Bashar’s chemical arsenal would be funny if it were not so blatantly perfidious. [It is] designed not only to give Mr. Obama an opportunity to back down [from military strikes], but also to help Assad to butcher his people.”
This is shocking stuff from America’s second most reliable ally in the region. As for reliable ally number one, Israeli Prime Minister Benjamin Netanyahu has visibly decided to be anything but a cooperative partner in the region, making Obama’s job more difficult at every turn. Since 2009, he has gleefully defied the American president, starting with his refusal to impose a freeze on illegal settlements in the occupied West Bank when specifically asked to do so by the president at the start of his first term. Meanwhile, most of the world has spent the past half-decade on tenterhooks over the possibility that his country might actually launch a much-threatened military strike on Iran’s nuclear facilities.
Since Hassan Rouhani was elected president of Iran and indicated his interest in reorienting policy to make a deal with the Western powers over its nuclear program, Israeli statements have become ever more shrill. In a September speechto the U.N. General Assembly, for instance, Netanyahu rolled out extreme rhetoric, claiming that Israel is “challenged by a nuclear-armed Iran that seeks our destruction.” This despite the fact that Iran possesses no nuclear weapons, has enriched not an ounce of uranium to weapons-grade level, and has probably not mastered the technology to manufacture a bomb. According to American intelligence reports, it has not yet even militarized its nuclear research.
Netanyahu’s speech was so full of hyperbole that observers concluded Israel was isolating itself from the rest of the world. “He was so anxious to make everything look as negative as possible he actually pushed the limits of credibility,” said Gary Sick, a former senior official in the Carter administration and an Iran expert. “He did himself harm by his exaggerations.”
Iran: Obama’s Ironic Beacon of Hope
Both Israel and Saudi Arabia are fearful that the Middle Eastern balance of power could be tipped against them if the United States and Iran are able to strike a deal. Seeking to throw the proverbial monkey wrench into the talks between Iran, the U.S., and the P5+1 powers (the permanent members of the U.N. security Council plus Germany), Israel has put forward a series of demands that go far beyond anything Iran would accept, or that the other countries would go along with. Before supporting the removal of international economic sanctions against Iran, Israelwants that country to suspend all enrichment of uranium, shut down its nuclear facilities, not be allowed any centrifuges to enrich uranium, abandon the heavy-water plant it is constructing to produce plutonium, permanently close its fortified underground installation at Fordo, and ship its stockpile of enriched uranium out of the country.
In contrast, it’s widely believed that the United States is ready to allow Iran to continue to enrich uranium, maintain some of its existing facilities, and retain a partial stockpile of enriched uranium for fuel under stricter and more intrusive inspection by the International Atomic Energy Agency.
Ironically, a U.S.-Iran détente is the one thing that could slow down or reverse the death spiral of American influence in the region. Iran, for instance, could be helpful in convincing President Assad of Syria to leave office in 2014, in advance of elections there, if radical Sunni Islamic organizations, including allies of al-Qaeda, are suppressed. Enormously influential in Afghanistan, Iran could also help stabilize that country after the departure of U.S. combat forces in 2014. And it could be enlisted to work alongside the United States and regional powers to stabilize Iraq.
More broadly, a U.S.-Iran entente might lead to a gradual de-escalation of the U.S. military presence in the Persian Gulf, including its huge naval forces, bases, and other facilities in Qatar, Bahrain, and Kuwait. It’s even conceivable that Iran could be persuaded to join other regional and global powers in seeking a just and lasting negotiated deal between Israel and the Palestinians. The United States and Iran have a number of common interests, including opposing al-Qaeda-style terrorism and cracking down on drug smuggling.
Of course, such a deal will be exceedingly difficult to nail down, if for no other reason than that the hardliners in both countries are determined to prevent it.
Right now, imagine the Obama administration as one of those vaudeville acts that keep a dozen plates spinning atop vibrating poles. At just this moment in the Middle East, those “plates” are tipping in every direction. There’s still time to prevent them all from crashing to the ground, but it would take a masterful effort from the White House — and it’s far from clear that anyone there is up to the task.
Bob Dreyfuss is an independent investigative journalist based in Cape May, New Jersey, specializing in politics and national security. He is a contributing editor at the Nation, and his blog appears daily at TheNation.com. In the past, he has written extensively for Rolling Stone, Mother Jones, the American Prospect, the New Republic, and many other magazines. He is the author ofDevil’s Game: How the United States Helped Unleash Fundamentalist Islam.
Follow TomDispatch on Twitter and join us on Facebook or Tumblr. Check out the newest Dispatch book, Nick Turse’s The Changing Face of Empire: Special Ops, Drones, Proxy Fighters, Secret Bases, and Cyberwarfare.
Copyright 2013 Bob Dreyfuss
Summary: On this Labor Day let’s revisit the lost history of the union movement, and its vital contribution to building the middle class.
To remember the loneliness, the fear and the insecurity of men who once had to walk alone in huge factories, beside huge machines. To realize that labor unions have meant new dignity and pride to millions of our countrymen. To be able to see what larger pay checks mean, not to a man as an employee, but as a husband and as a father. To know these things is to understand what American labor means.
— Adlai Stevenson, in a speech to the American Federation of Labor, New York City on 22 September 1952
- Rise and Fall of America’s Middle Class seen in graphs
- Throwing away a 150 years of effort
- For More Information
- A note from our past
(1) Rise and Fall of America’s Middle Class seen in graphs
Since 1990 wages are falling as a share of Gross Domestic Income (GDI); profits are rising. The reasons are complex, the result has by now become unmistakable: a shift of our national income from return on labor to return on capital. Since the nation’s wealth is so highly concentrated, the result is rising inequality of income.
Wages as a share of Gross Domestic Income: down and falling.
Profits as a share of Gross Domestic Income: up.
(3) Throwing away a 150 years of effort
The middle class was not a gift of the Blue Fairy. Instead of “Bibbidi-Bobbidi-Boo” there was 150 years of worker working together, mobilizing against their employers — who organized cartels to fight their employees and raise prices for their customers.
It was a long bloody struggle, The victory of unions was foundational for the growth of America’s middle class. The fall of the unions was a major factor undermining the middle class. It had many causes: corruption, greed, stupidity, infiltration by organized crime — and the long successful counter-revolution by corporations, now eroding away the middle class.
For a blow-by-blow of unions rise see this series by Erik Loomis (Asst Prof of History, U RI). The toll these people paid is as much a cost of building America as much as that paid by our the members of our armed forces.
- September 9, 1739: The Stono Rebellion
- July 2, 1822: Denmark Vesey executed for planning slave revolt in South Carolina
- August 21, 1831: Nat Turner’s Rebellion
- July 3, 1835: Paterson Textile Strike of 1835
- February 13, 1865: Sons of Vulcan win nation’s first union contract
- December 6, 1865: Ratification of the 13th Amendment
- June 21, 1877: Molly Maguires executed in Pennsylvania
- July 14, 1877: The Great Railroad Strike
- May 6, 1882: Chinese Exclusion Act
- September 2, 1885: Rock Springs Massacre
- May 4, 1886: Haymarket Riot
- December 11, 1886: Creation of the Colored Farmers Alliance
- February 8, 1887: Grover Cleveland signs the Dawes Act
- November 22, 1887: Thibodaux Massacre
- July 4, 1892: People’s Party Convention
- July 6, 1892: The Homestead Strike
- July 11, 1892: Miners outside of Coeur d’Alene, Idaho blow up the Frisco Mill
- February 7, 1894: Cripple Creek gold miners strike
- April 30, 1894: Coxey’s Army
- June 26, 1894: Pullman Strike
- May 12, 1902: Anthracite coal miners strike in Pennsylvania begins, TR mediates
- December 30, 1905: Murder of former Idaho Governor Frank Steunenberg
- November 22, 1909: Uprising of the 20,000
- August 9, 1910: invention of electric washing machine transforms women’s unpaid domestic labor
- March 25, 1911: Triangle Shirtwaist Fire
- May 3, 1911: Wisconsin passes first workers compensation law
- February 24, 1912: Beating of the women and children at Lawrence
- June 7, 1913: Paterson Silk Pageant. Addendum here.
- August 3, 1913: Wheatland Riot
- April 20, 1914: Ludlow Massacre
- November 19, 1915: Joe Hill executed in Utah
- November 5, 1916: The Everett Massacre
- July 12, 1917: The Bisbee Deportation
- August 1, 1917: Frank Little lynched in Butte
- June 16, 1918: Eugene Debs arrested for violating Espionage Act, for opposition to WWI
- February 6, 1919: The Seattle General Strike
- November 11, 1919: The Centralia Massacre
- May 19, 1920: Matewan Massacre
- August 25, 1921: Battle of Blair Mountain
- June 11, 1925: Davis Day
- August 25, 1925: Founding of the Brotherhood of Sleeping Car Porters
- August 23, 1927: Execution of Sacco and Vanzetti
- March 7, 1932: River Rouge march and repression
- May 9, 1934: Longshoremen strike begins in San Francisco
- May 16, 1934: Minneapolis Teamsters Strike
- November 9, 1935: Creation of the CIO
- February 11, 1937: The Flint Sit-Down Strike ends
- May 30, 1937: Memorial Day Massacre in Chicago
- January 25, 1941: March on Washington Movement leads to end of official segregation in defense industry
- August 4, 1942: Creation of the Bracero Program
- June 6, 1943: Detroit Hate Strike
- July 17, 1944: Port Chicago explosion
- August 22, 1945: Air Line Stewardesses Association, first flight attendant union, forms
- September 22, 1946: Tobacco workers win contract in North Carolina, starting CIO’s Operation Dixie campaign
- December 2, 1946: The Oakland General Strike
- June 20, 1947: President Truman vetoes Taft-Hartley Act
- April 8, 1952: Truman nationalizes steel industry – Workers wages cannot rise as fast as CEOs’
- December 5, 1955: Merger of the AFL and CIO
- January 17, 1962: President Kennedy issues Executive Order 10988, authorizing collective bargaining for public workers
- April 4, 1968: Assassination of Martin Luther King during sanitation strike in Memphis
- January 5, 1970: Murder of UMWA reformer Jock Yablonski
- July 29, 1970: United Farm Workers force growers into the first union contract in the history of California agricultural labor
- April 28, 1971: OSHA begins
- May 26, 1937: Battle of the Overpass
- March 23, 1974: Coalition of Trade Union Women holds first meeting
- October 23, 1976: International Woodworkers of America Local 3-101 holds a monthly union meeting
- August 3, 1981: Air Traffic Controllers go on strike in biggest disaster in organized labor’s history
- September 17, 1989: The Pittston Strike
- May 10, 1993: Kader Toy Fire
- January 1, 1994: NAFTA
- March 4, 1998: Supreme Court rules in Oncale v. Sundonwer Offshore Services. Same-sex sexual harassment
For More Information
Posts about the conflict between labor and capital:
- The new American economy: concentrating business power to suit an unequal society, 27 April 2012
- Public employee unions – an anvil chained to the Democratic Party, 15 February 2013
- Why the 1% is winning, and we are not, 26 May 2013 — They are smart, organized, and have planned how to win.
About the New America, now under construction:
- Origins of what may become the 3rd American Republic (a plutocracy), 8 April 2011
- Why Americans should love Tolkien’s Lord of the Rings – we live there, 13 December 2011
- The new American economy: concentrating business power to suit an unequal society, 27 April 2012
- The voice of plutocrats yearning for dominance and control, 16 September 2012
- We’ve worked through all 5 stages of grief for the Republic. Now, on to The New America!, 8 January 2013
- Compare our New America to the America-that-once-was (a great nation), 12 June 2013
- Glimpses of the New America being born now, 18 June 2013
- Why Elizabeth Bennet could not marry Mr. Darcy. Nor could your daughter., 12 July 2013
- Watch as plutocrats mold us into a New America, a nation more pleasing to their sight, 18 July 2013
- Billionaires mold our schools to produce better help in a New America, 20 July 2013
(4) A note from our past
Reprinted from Common Dreams (under a Creative Commons Attribution-Share Alike 3.0 License)
By Richard Heinberg
Stop me if you’ve heard this one. What’s an obscenity that starts with “f” and ends with “ck”?
Oh wait, sorry, this is supposed to be a serious article about fracking. That’s right, we’re talking about The Biggest Development in the energy world since the birth of the sun, the Revolution that is freeing America forever from bondage to oil imports.
But here’s the thing: though this revolution is only a few years old, it’s already losing steam. There are two big reasons why.
The first has to do with environmental problems that can’t be swept under the carpet any longer. The image of a homeowner lighting his tap water on fire in Josh Fox’s documentary film “Gasland” has become a cliché; still, for a while the industry was successfully able to argue that adverse impacts from fracking to water, air, soil, wildlife, livestock, and human health are negligible. Industry-funded studies declared the practice safe, and the EPA appeared to back them up.
Drilling companies tended to target economically depressed regions, where poverty forced most townsfolk to take whatever short-term jobs and production royalties were offered, while stuffing their concerns about nosebleeds, headaches, dying pets, intolerable noise, and tainted water. Meanwhile, citizens who suffered the worst health effects or property damage were led to sign non-disclosure agreements in order to receive settlement payoffs (including two children ages 7 and 10 who have been given lifetime bans from speaking about fracking), thus keeping their plight out of public view.
But the bad news just keeps leaking, like methane through a bad well casing. Former Mobil Oil VP Louis W. Allstadt, who spent his career running oil production operations and company mergers, now speaks on behalf of anti-fracking resistance groups, pointing to studies revealing that compromised casings (and resulting instances of water contamination) are far more common than the industry claims.
Meanwhile Los Angeles Times has uncovered documents showing that the EPA has systematically ignored evidence of environmental harms from fracking, choosing not to publicize or act on data collected by its own staff.
A few years ago fracking for shale gas or tight oil was still novel and confined to small regions, but now tens of thousands of wells have been drilled and millions of Americans have personal experience with the noise, truck traffic, fumes, and local political turmoil that seem inevitably to follow in fracking’s wake. Hundreds of anti-fracking citizen groups have formed, public sentiment is turning, and communities have begun seeking bans or moratoria on the practice. The industry is on the defensive: Wayne County, PA activists are currently celebrating the cancellation of 1500 drilling leases covering 100,000 acres of land.
Americans are being subjected to a massive PR assault attempting to persuade them that shale gas and tight oil have brightened America’s energy future. The problem? It’s simply not true.
New York State’s moratorium on fracking remains in effect, despite massive industry efforts to end it. Meanwhile the Colorado city of Longmont has voted to ban fracking altogether, and the State of Colorado is suing the city.
Fracking’s second problem is actually a bigger one, though less publicized: its production potential was over-sold. Everyone who pays attention to energy issues has heard that America has a hundred years or more of natural gas thanks to the application of fracking to shale reservoirs, and that the US is on track to out-produce Saudi Arabia now that oil is flowing from fracked fields in North Dakota and Texas. To most, the news at first sounded hopeful and reassuring. Yet as actual production numbers accumulate, it appears that claims made for fracking were simply too good to be true.
It turns out there are only a few “plays” or geological formations in the US from which shale gas is being produced; in virtually all of them, except the Marcellus (in Pennsylvania and West Virginia), production rates are already either in plateau or decline.
Why so soon? A major challenge bedeviling drillers is the high variability within shale plays. Each tight oil or shale gas-bearing geologic formation tends to be characterized by a small core area (usually a few counties) where production is profitable and plentiful, surrounded by a much larger region where per-well production rates are lower to start with and drop fast—often falling 60 percent during the first year. Given the expense of horizontal drilling and fracking, it’s hard to make money in non-core areas unless oil and gas prices are stratospheric. As the “sweet spots” get drilled to capacity, producers are being forced to the fringes, taking on more debt because sales of product don’t cover operating expenses.
With decline rates so high, promised production volumes are turning out to be so much hype. America’s hundred years of natural gas, heralded by President Obama as a national energy game-changer, actually amounts to a mere 24 years by official estimates, even less according to unofficial but well-informed calculations.
Oil analyst Rune Likvern says shale gas and tight oil suffer from the “Red Queen” syndrome, citing a character in Lewis Carroll’s Through the Looking Glass. In the story, the fictional Red Queen jogs along at top speed but never gets anywhere; as she tells Alice, “It takes all the running you can do, to keep in the same place.” Similarly, with worsening well decline rates, it will soon take all the drilling the industry can do just to keep production steady; then, as all the best drilling sites are exhausted, the Red Queen will start falling behind. Before 2020, shale gas and tight oil production will top out and start to decline. Americans will wonder what happened to the lavish economic benefits the industry promised.
Recently Shell took a $2 billion write-down on its liquids-rich shale assets in North America. While no details were released, it’s likely the company was simply acknowledging the unprofitability of leases in non-core regions, purchased back when shale plays were being advertised as “manufacturing operations” in which companies could successfully sink a drill bit virtually anywhere.
The oil industry itself is starting to learn that the shale revolution just ain’t all it was fracked up to be.
Despite continuing profits, the oil-and-gas industry as a whole appears to have entered its sunset years. Major oil companies have seen production decline by over 25% in the last decade. Both the number of wells drilled and the amount of inflation-adjusted capital invested in exploration and production have doubled, with negligible results. Raymond Pierrehumbert, Professor of Geophysical Sciences at the University of Chicago, recently summarized the situation with crystalline brevity: “Oil production technology is giving us ever more expensive oil with ever-diminishing returns for the ever-increasing effort that needs to be invested.”
Which brings us to the bottom line. Americans are being subjected to a massive PR assault attempting to persuade them that shale gas and tight oil have brightened America’s energy future. What has really changed is the nation’s energy conversation: until recently, it was about how we should reduce our dependency on depleting, climate-changing fossil fuels. Now our “conversation” has become a one-sided harangue about the energy, jobs, and tax revenues the industry insists will flow from fracking from now ’til kingdom come, and how these outweigh environmental concerns.
The data do not support these claims. Therefore it is critically important that we return America’s energy focus to the most critical imperative of our time—the necessary and inevitable transition away from our current dependence on fossil fuels.
Richard Heinberg is a senior fellow at the Post Carbon Institute and the author of eleven books, most recently Snake Oil: How Fracking’s False Promise of Plenty Imperils Our Future. Previous books include The Party’s Over: Oil, War, and the Fate of Industrial Societies, Peak Everything: Waking Up to the Century of Declines, and The End of Growth: Adapting to Our New Economic Reality.
Editor’s Note: Tom Engelhardt — on his TomDispatch Facebook page – introduces this essay by energy expert Michael Klare as “one of the most shocking and important TomDispatch has ever published.” No wonder. Klare dispels the illusion that we are about to enter a Happy Age of Renewable Energy. Rather, he shows that we are entering an Age of More Extreme Carbon, with a radically accelerated global warming. Extreme energy production is the new, unstoppable Leviathan, reminiscent of Oppenheimer’s terrible vision from the Bhagavad Gita : “Now I am become Death, the destroyer of worlds.”
Reprinted from TomDispatch.com
The Third Carbon Age
Don’t for a Second Imagine We’re Heading for an Era of Renewable Energy
When it comes to energy and economics in the climate-change era, nothing is what it seems. Most of us believe (or want to believe) that the second carbon era, the Age of Oil, will soon be superseded by the Age of Renewables, just as oil had long since superseded the Age of Coal. President Obama offered exactly this vision in a much-praised June address on climate change. True, fossil fuels will be needed a little bit longer, he indicated, but soon enough they will be overtaken by renewable forms of energy.
Many other experts share this view, assuring us that increased reliance on “clean” natural gas combined with expanded investments in wind and solar power will permit a smooth transition to a green energy future in which humanity will no longer be pouring carbon dioxide and other greenhouse gases into the atmosphere. All this sounds promising indeed. There is only one fly in the ointment: it is not, in fact, the path we are presently headed down. The energy industry is not investing in any significant way in renewables. Instead, it is pouring its historic profits into new fossil-fuel projects, mainly involving the exploitation of what are called “unconventional” oil and gas reserves.
The result is indisputable: humanity is not entering a period that will be dominated by renewables. Instead, it is pioneering the third great carbon era, the Age of Unconventional Oil and Gas.
That we are embarking on a new carbon era is increasingly evident and should unnerve us all. Hydro-fracking – the use of high-pressure water columns to shatter underground shale formations and liberate the oil and natural gas supplies trapped within them — is being undertaken in ever more regions of the United States and in a growing number of foreign countries. In the meantime, the exploitation of carbon-dirty heavy oil and tar sands formations is accelerating in Canada, Venezuela, and elsewhere.
It’s true that ever more wind farms and solar arrays are being built, but here’s the kicker: investment in unconventional fossil-fuel extraction and distribution is now expected to outpace spending on renewables by a ratio of at least three-to-one in the decades ahead.
According to the International Energy Agency (IEA), an inter-governmental research organization based in Paris, cumulative worldwide investment in new fossil-fuel extraction and processing will total an estimated $22.87 trillion between 2012 and 2035, while investment in renewables, hydropower, and nuclear energy will amount to only $7.32 trillion. In these years, investment in oil alone, at an estimated $10.32 trillion, is expected to exceed spending on wind, solar, geothermal, biofuels, hydro, nuclear, and every other form of renewable energy combined.
In addition, as the IEA explains, an ever-increasing share of that staggering investment in fossil fuels will be devoted to unconventional forms of oil and gas: Canadian tar sands, Venezuelan extra-heavy crude, shale oil and gas, Arctic and deep-offshore energy deposits, and other hydrocarbons derived from previously inaccessible reserves of energy. The explanation for this is simple enough. The world’s supply of conventional oil and gas — fuels derived from easily accessible reservoirs and requiring a minimum of processing — is rapidly disappearing. With global demand for fossil fuels expected to rise by 26% between now and 2035, more and more of the world’s energy supply will have to be provided by unconventional fuels.
In such a world, one thing is guaranteed: global carbon emissions will soar far beyond our current worst-case assumptions, meaning intense heat waves will become commonplace and our few remaining wilderness areas will be eviscerated. Planet Earth will be a far — possibly unimaginably — harsher and more blistering place. In that light, it’s worth exploring in greater depth just how we ended up in such a predicament, one carbon age at a time.
The First Carbon Era
The first carbon era began in the late eighteenth century, with the introduction of coal-powered steam engines and their widespread application to all manner of industrial enterprises. Initially used to power textile mills and industrial plants, coal was also employed in transportation (steam-powered ships and railroads), mining, and the large-scale production of iron. Indeed, what we now call the Industrial Revolution was largely comprised of the widening application of coal and steam power to productive activities. Eventually, coal would also be used to generate electricity, a field in which it remains dominant today.
This was the era in which vast armies of hard-pressed workers built continent-spanning railroads and mammoth textile mills as factory towns proliferated and cities grew. It was the era, above all, of the expansion of the British Empire. For a time, Great Britain was the biggest producer and consumer of coal, the world’s leading manufacturer, its top industrial innovator, and its dominant power — and all of these attributes were inextricably connected. By mastering the technology of coal, a small island off the coast of Europe was able to accumulate vast wealth, develop the world’s most advanced weaponry, and control the global sea-lanes.
The same coal technology that gave Britain such global advantages also brought great misery in its wake. As noted by energy analyst Paul Roberts in The End of Oil, the coal then being consumed in England was of the brown lignite variety, “chock full of sulfur and other impurities.” When burned, “it produced an acrid, choking smoke that stung the eyes and lungs and blackened walls and clothes.” By the end of the nineteenth century, the air in London and other coal-powered cities was so polluted that “trees died, marble facades dissolved, and respiratory ailments became epidemic.”
For Great Britain and other early industrial powers, the substitution of oil and gas for coal was a godsend, allowing improved air quality, the restoration of cities, and a reduction in respiratory ailments. In many parts of the world, of course, the Age of Coal is not over. In China and India, among other places, coal remains the principal source of energy, condemning their cities and populations to a twenty-first-century version of nineteenth-century London and Manchester.
The Second Carbon Era
The Age of Oil got its start in 1859 when commercial production began in western Pennsylvania, but only truly took off after World War II, with the explosive growth of automobile ownership. Before 1940, oil played an important role in illumination and lubrication, among other applications, but remained subordinate to coal; after the war, oil became the world’s principal source of energy. From 10 million barrels per day in 1950, global consumption soared to 77 million in 2000, a half-century bacchanalia of fossil fuel burning.
Driving the global ascendancy of petroleum was its close association with theinternal combustion engine (ICE). Due to oil’s superior portability and energy intensity (that is, the amount of energy it releases per unit of volume), it makes the ideal fuel for mobile, versatile ICEs. Just as coal rose to prominence by fueling steam engines, so oil came to prominence by fueling the world’s growing fleets of cars, trucks, planes, trains, and ships. Today, petroleum supplies about 97% of all energy used in transportation worldwide.
Oil’s prominence was also assured by its growing utilization in agriculture and warfare. In a relatively short period of time, oil-powered tractors and other agricultural machines replaced animals as the primary source of power on farms around the world. A similar transition occurred on the modern battlefield, with oil-powered tanks and planes replacing the cavalry as the main source of offensive power.
These were the years of mass automobile ownership, continent-spanning highways, endless suburbs, giant malls, cheap flights, mechanized agriculture, artificial fibers, and — above all else — the global expansion of American power. Because the United States possessed mammoth reserves of oil, was the first to master the technology of oil extraction and refining, and the most successful at utilizing petroleum in transportation, manufacturing, agriculture, and war, it emerged as the richest and most powerful country of the twenty-first century, a saga told with great relish by energy historian Daniel Yergin in The Prize. Thanks to the technology of oil, the U.S. was able to accumulate staggering levels of wealth, deploy armies and military bases to every continent, and control the global air and sea-lanes — extending its power to every corner of the planet.
However, just as Britain experienced negative consequences from its excessive reliance on coal, so the United States — and the rest of the world — has suffered in various ways from its reliance on oil. To ensure the safety of its overseas sources of supply, Washington has established tortuous relationships with foreign oil suppliers and has fought several costly, debilitating wars in the Persian Gulf region, a sordid history I recount in Blood and Oil. Overreliance on motor vehicles for personal and commercial transportation has left the country ill-equipped to deal with periodic supply disruptions and price spikes. Most of all, the vast increase in oil consumption — here and elsewhere — has produced a corresponding increase in carbon dioxide emissions, accelerating planetary warming (a process begun during the first carbon era) and exposing the country to the ever more devastating effects of climate change.
The Age of Unconventional Oil and Gas
The explosive growth of automotive and aviation travel, the suburbanization of significant parts of the planet, the mechanization of agriculture and warfare, the global supremacy of the United States, and the onset of climate change: these were the hallmarks of the exploitation of conventional petroleum. At present, most of the world’s oil is still obtained from a few hundred giant onshore fields in Iran, Iraq, Kuwait, Russia, Saudi Arabia, the United Arab Emirates, the United States, and Venezuela, among other countries; some additional oil is acquired from offshore fields in the North Sea, the Gulf of Guinea, and the Gulf of Mexico. This oil comes out of the ground in liquid form and requires relatively little processing before being refined into commercial fuels.
But such conventional oil is disappearing. According to the IEA, the major fields that currently provide the lion’s share of global petroleum will lose two-thirds of their production over the next 25 years, with their net output plunging from 68 million barrels per day in 2009 to a mere 26 million barrels in 2035. The IEA assures us that new oil will be found to replace those lost supplies, but most of this will be of an unconventional nature. In the coming decades, unconventional oils will account for a growing share of the global petroleum inventory, eventually becoming our main source of supply.
The same is true for natural gas, the second most important source of world energy. The global supply of conventional gas, like conventional oil, is shrinking, and we are becoming increasingly dependent on unconventional sources of supply — especially from the Arctic, the deep oceans, and shale rock via hydraulic fracturing.
In certain ways, unconventional hydrocarbons are akin to conventional fuels. Both are largely composed of hydrogen and carbon, and can be burned to produce heat and energy. But in time the differences between them will make an ever-greater difference to us. Unconventional fuels – especially heavy oils and tar sands – tend to possess a higher proportion of carbon to hydrogen than conventional oil, and so release more carbon dioxide when burned. Arctic and deep-offshore oil require more energy to extract, and so produce higher carbon emissions in their very production.
“Many new breeds of petroleum fuels are nothing like conventional oil,” Deborah Gordon, a specialist on the topic at the Carnegie Endowment for International Peace, wrote in 2012. “Unconventional oils tend to be heavy, complex, carbon laden, and locked up deep in the earth, tightly trapped between or bound to sand, tar, and rock.”
By far the most worrisome consequence of the distinctive nature of unconventional fuels is their extreme impact on the environment. Because they are often characterized by higher ratios of carbon to hydrogen, and generally require more energy to extract and be converted into usable materials, they produce more carbon dioxide emissions per unit of energy released. In addition, the process that produces shale gas, hailed as a “clean” fossil fuel, is believed by many scientists to cause widespread releases of methane, a particularly potent greenhouse gas.
All of this means that, as the consumption of fossil fuels grows, increasing, not decreasing, amounts of CO2 and methane will be released into the atmosphere and, instead of slowing, global warming will speed up.
And here’s another problem associated with the third carbon age: the production of unconventional oil and gas turns out to require vast amounts of water — for fracking operations, to extract tar sands and extra-heavy oil, and to facilitate the transport and refining of such fuels. This is producing a growing threat of water contamination, especially in areas of intense fracking and tar sands production, along with competition over access to water supplies among drillers, farmers, municipal water authorities, and others. As climate change intensifies, drought will become the norm in many areas and so this competition will only grow fiercer.
Along with these and other environmental impacts, the transition from conventional to unconventional fuels will have economic and geopolitical consequences hard to fully assess at this moment. As a start, the exploitation of unconventional oil and gas reserves from previously inaccessible regions involves the introduction of novel production technologies, including deep-sea and Arctic drilling, hydro-fracking, and tar-sands upgrading. One result has been a shakeup in the global energy industry, with the emergence of innovative companies possessing the skills and determination to exploit the new unconventional resources — much as occurred during the early years of the petroleum era when new firms arose to exploit the world’s oil reserves.
This has been especially evident in the development of shale oil and gas. In many cases, the breakthrough technologies in this field were devised and deployed by smaller, risk-taking firms like Cabot Oil and Gas, Devon Energy Corporation, Mitchell Energy and Development Corporation, and XTO Energy. These and similar companies pioneered the use of hydro-fracking to extract oil and gas from shale formations in Arkansas, North Dakota, Pennsylvania, and Texas, and later sparked a stampede by larger energy firms to obtain stakes of their own in these areas. To augment those stakes, the giant firms are gobbling up many of the smaller and mid-sized ones. Among the most conspicuous takeovers was ExxonMobil’s 2009 purchase of XTO for $41 billion.
That deal highlights an especially worrisome feature of this new era: the deployment of massive funds by giant energy firms and their financial backers to acquire stakes in the production of unconventional forms of oil and gas — in amounts far exceeding comparable investments in either conventional hydrocarbons or renewable energy. It’s clear that, for these companies, unconventional energy is the next big thing and, as among the most profitable firms in history, they are prepared to spend astronomical sums to ensure that they continue to be so. If this means investment in renewable energy is shortchanged, so be it. “Without a concerted policymaking effort” to favor the development of renewables, Carnegie’s Gordon warns, future investments in the energy field “will likely continue to flow disproportionately toward unconventional oil.”
In other words, there will be an increasingly entrenched institutional bias among energy firms, banks, lending agencies, and governments toward next-generation fossil-fuel production, only increasing the difficulty of establishing national and international curbs on carbon emissions. This is evident, for example, in the Obama administration’s undiminished support for deep-offshore drilling and shale gas development, despite its purported commitment to reduce carbon emissions. It is likewise evident in the growing international interest in the development of shale and heavy-oil reserves, even as fresh investment in green energy is being cut back.
As in the environmental and economic fields, the transition from conventional to unconventional oil and gas will have a substantial, if still largely undefined, impact on political and military affairs.
U.S. and Canadian companies are playing a decisive role in the development of many of the vital new unconventional fossil-fuel technologies; in addition, some of the world’s largest unconventional oil and gas reserves are located in North America. The effect of this is to bolster U.S. global power at the expense of rival energy producers like Russia and Venezuela, which face rising competition from North American companies, and energy-importing states like China and India, which lack the resources and technology to produce unconventional fuels.
At the same time, Washington appears more inclined to counter the rise of China by seeking to dominate the global sea lanes and bolster its military ties with regional allies like Australia, India, Japan, the Philippines, and South Korea. Many factors are contributing to this strategic shift, but from their statements it is clear enough that top American officials see it as stemming in significant part from America’s growing self-sufficiency in energy production and its early mastery of the latest production technologies.
“America’s new energy posture allows us to engage [the world] from a position of greater strength,” National Security Advisor Tom Donilon asserted in an April speech at Columbia University. “Increasing U.S. energy supplies act as a cushion that helps reduce our vulnerability to global supply disruptions [and] affords us a stronger hand in pursuing and implementing our international security goals.”
For the time being, the U.S. leaders can afford to boast of their “stronger hand” in world affairs, as no other country possesses the capabilities to exploit unconventional resources on such a large scale. By seeking to extract geopolitical benefits from a growing world reliance on such fuels, however, Washington inevitably invites countermoves of various sorts. Rival powers, fearful and resentful of its geopolitical assertiveness, will bolster their capacity to resist American power — a trend already evident in China’s accelerating naval and missile buildup.
At the same time, other states will seek to develop their own capacity to exploit unconventional resources in what might be considered a fossil-fuels version of an arms race. This will require considerable effort, but such resources are widely distributed across the planet and in time other major producers of unconventional fuels are bound to emerge, challenging America’s advantage in this realm (even as they increase the staying power and global destructiveness of the third age of carbon). Sooner or later, much of international relations will revolve around these issues.
Surviving the Third Carbon Era
Barring unforeseen shifts in global policies and behavior, the world will become increasingly dependent on the exploitation of unconventional energy. This, in turn, means an increase in the buildup of greenhouse gases with little possibility of averting the onset of catastrophic climate effects. Yes, we will also witness progress in the development and installation of renewable forms of energy, but these will play a subordinate role to the development of unconventional oil and gas.
Life in the third carbon era will not be without its benefits. Those who rely on fossil fuels for transportation, heating, and the like can perhaps take comfort from the fact that oil and natural gas will not run out soon, as was predicted by many energy analysts in the early years of this century. Banks, the energy corporations, and other economic interests will undoubtedly amass staggering profits from the explosive expansion of the unconventional oil business and global increases in the consumption of these fuels. But most of us won’t be rewarded. Quite the opposite. Instead, we’ll experience the discomfort and suffering accompanying the heating of the planet, the scarcity of contested water supplies in many regions, and the evisceration of the natural landscape.
What can be done to cut short the third carbon era and avert the worst of these outcomes? Calling for greater investment in green energy is essential but insufficient at a moment when the powers that be are emphasizing the development of unconventional fuels. Campaigning for curbs on carbon emissions is necessary, but will undoubtedly prove problematic, given an increasingly deeply embedded institutional bias toward unconventional energy.
Needed, in addition to such efforts, is a drive to expose the distinctiveness and the dangers of unconventional energy and to demonize those who choose to invest in these fuels rather than their green alternatives. Some efforts of this sort are already underway, including student-initiated campaigns to persuade or compel college and university trustees to divest from any investments in fossil-fuel companies. These, however, still fall short of a systemic drive to identify and resist those responsible for our growing reliance on unconventional fuels.
For all President Obama’s talk of a green technology revolution, we remain deeply entrenched in a world dominated by fossil fuels, with the only true revolution now underway involving the shift from one class of such fuels to another. Without a doubt, this is a formula for global catastrophe. To survive this era, humanity must become much smarter about this new kind of energy and then take the steps necessary to compress the third carbon era and hasten in the Age of Renewables before we burn ourselves off this planet.
Michael Klare is a professor of peace and world security studies at Hampshire College, a TomDispatch regular, and the author, most recently, of The Race for What’s Left, just published in paperback by Picador. A documentary movie based on his book Blood and Oil can be previewed and ordered at www.bloodandoilmovie.com. You can follow Klare on Facebook by clicking here.
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Copyright 2013 Michael Klare
Informal Poll of Downtown Businesses Raises Serious Questions About Grass Valley’s Retail Focus Group Report
By Don Pelton
Our friend, Deni Draper-Silberstein, went to the one public meeting set up to discuss the Retail Focus Group Report commissioned by the Grass Valley City Council and conducted by Chabin Concepts, Inc.
The City approved this $7500 study in order to determine local shopping patterns and preferences and apparently to gauge the reaction of local business owners to the idea of attracting more big box stores to our community.
Here’s how Deni explained her reaction to that meeting (from her Facebook posting on Tuesday 7/23/13):
There were 3 meetings regarding the City’s solicitation of big box stores: one meeting for the public, one for local businesses, and I forget who the third meeting was for. When I went to the “public” meeting regarding this issue, the consultants whom the City have hired, said that, except for the local restaurants, the downtown business owners who attended the “business owners’” meeting, were overwhelmingly in favor of bringing in big box stores. That the downtown businesses were “overwhelmingly” in favor of bringing in mega-competition didn’t make sense to me, so after the meeting, I went to 12 downtown businesses and asked either the manager or the owner how they felt about this idea. Eleven of the 12 said that they didn’t KNOW that the consultants had had a meeting of the local businesses, and 12 out of 12 said that they are definitely OPPOSED to the idea. I noticed last week that one of the most vocally outraged of the 12 businesses has a “going out of business” sign up at her store.
Everyone was definitely opposed to the idea of bringing in big boxes … a handful were vehemently opposed. The emotions ranged from vehemently opposed, to angry, to upset, to concerned, to defeated.
Although Deni’s poll was informal and (in her words) “crude,” she nevertheless gave it some forethought and organized her approach before she began, carefully recording her results.
She explained her methodology as follows:
I only spoke with owners/managers because I couldn’t know whether or not employees would accurately represent the business for whom they were working – if the owner or manager was not available, I left without surveying the business.
The questions were, 1) Did you know about the online survey, 2) Did you fill out the survey, 3) Did you know about the focus group, 4) Did you attend the focus group, 5) Are you in favor of Grass Valley bringing in a big box store that sells the same goods as your business.
I made these questions up as I left the focus group – held at Holiday Inn, GV – and walked toward downtown, so they’re not necessarily the best questions one could have asked. Also, I knew from my training in psychology that I, at least, needed to ask the same questions to everyone I surveyed in order to establish some measure of consistency, so I could organize the responses reliably in order to assess the results of this rather crude survey, then establish at least the potential for a valid conclusion – which I won’t draw, but, rather, will let the evidence speak for itself.
The following are Deni’s detailed results, plus her observations about the process:
GV Merchant Survey conducted by Deni on 5/23/13
Merchant Knew of Survey Filled Out Knew of Focus Group Attended Box+ Merchant 1 Y Y N N N Merchant 2 N N N N N Merchant 3 N N N N N Merchant 4 N N N N N Merchant 5 N N N N N Merchant 6 N N N N N Merchant 7 N N N N N Merchant 8 N N N N N Merchant 9 N N N N N Merchant 10 N N N N N Merchant 11 N N N N N Merchant 12 N N N N N
Knew of Survey = the owner/manager of the local business knew about the on-line survey that had to be filled out in order to be invited to the Focus Group meetings
Filled out = the owner/manager filled out the survey
Knew of Focus Group = the owner/manager was informed that a Focus Group meeting for the local business owners was being held on a specific date
Attended = the business was represented at the Business Owners’ Focus Group meeting
Box + = when asked by me, the owner/manager of the business was in favor of soliciting big box stores to set up business in Grass Valley.
If my memory serves me well, there were Four Layers of hoops to jump through before one could attend a meeting (I know there were at least three hoops because I was appalled at how clever they were at making access to the facts difficult, and at keeping potential opponents separated from each other (divide and conquer) i.e. IF one complied with the 4 layers, THEN they could attend ONLY the meeting to which they were invited – the public could ONLY attend the “public” meeting, the business owners could ONLY attend the business owners’ meeting, etc.)
1st layer: One had to know about the survey
2nd layer: One had to take the time to fill out the survey
3rd layer: One had to be invited to attend the meeting (the invitation only occured IF one had filled out the survey, although the owner of Merchant 1 said that s/he had filled out the survey, then kept waiting to be informed of the date of the Business Owners’ Focus Group, but never heard back from the consultants)
4th layer: One had to respond to the invitation by making a reservation to attend the Focus Group Meeting
Deni also sent me some interesting observations on the general subject of big box stores and their effect on local economies, which I’ll print here in Sierra Voices in a subsequent posting.
In the meantime her survey results and the comments by some local business owners about the City/consultant’s inadequate communication raises serious questions about the integrity and inclusiveness of the Focus Group Report itself.
Reprinted from Too Much: An online weekly on excess and inequality
To protect our health, we’ve learned to have our ‘vital signs’ taken. But no visit to a doctor’s office can tell us the vital signs that determine where on earth people can expect to live the longest lives.
Let’s talk life expectancy.
The stats first. They tell a clear story: Americans now live shorter lives than men and women in most of the rest of the developed world. And that gap is growing.
Back in 1990, shouts a new study published last week in the prestigious Journal of the American Medical Association, the United States ranked just 20th on life expectancy among the world’s 34 industrial nations. The United States now ranks 27th — despite spending much more on health care than any other nation.
Americans, notes an editorial the journal ran to accompany the study, are losing ground globally “by every” health measure.
Why such poor performance? Media reports on last week’s new State of U.S. Health study hit all the usual suspects: poor diet, poor access to affordable health care, poor personal health habits, and just plain poverty.
In the Wall Street Journal, for instance, a chief wellness officer in Ohio opinedthat if Americans exercised more and ate and smoked less, the United States would surely start moving up in the global health rankings.
But many epidemiologists — scientists who study health outcomes — have their doubts. They point out that the United States ranked as one of the world’s healthiest nations in the 1950s, a time when Americans smoked heavily, ate a diet that would horrify any 21st-century nutritionist, and hardly ever exercised.
Poor Americans, then as now, had chronic problems accessing health care. But poverty, epidemiologists note, can’t explain why fully insured middle-income Americans today have significantly worse health outcomes than their middle-income counterparts in other rich nations.
The University of Washington’s Dr. Stephen Bezruchka has been tracking these outcomes since the 1990s. The new research published in the Journal of the American Medical Association, Bezruchka told Too Much last week, should worry Americans at all income levels.
“Even if we are rich, college-educated, white-skinned, and practice all the right health behaviors,” he notes, “similar people in other rich nations will live longer.”
A dozen years ago, Bezruchka published in Newsweek the first mass-mediacommentary, at least in the United States, to challenge the conventional take on poor U.S. global health rankings.
To really understand America’s poor health standing globally, epidemiologists like Bezruchka posit, we need to look at “the social determinants of health,” those social and economic realities that define our daily lives.
None of these determinants matter more, these researchers contend, than the level of a society’s economic inequality, the divide between the affluent and everyone else. Over 170 studies worldwide have so far linked income inequality to health outcomes. The more unequal a society, the studies show, the more unhealthy most everyone in it — and not the poor alone.
Just how does inequality translate into unhealthy outcomes? Growing numbers of researchers place the blame on stress. The more inequality in a society, the more stress on a daily level. Chronic stress, over time, wears down our immune systems and leaves us more vulnerable to disease.
This same stress drives people to seek relief in unhealthy habits. They may do drugs or smoke — or eat more “comfort foods” packed with sugar and fat.
Inequality has an equally potent impact on policy decisions around health.
“A substantial proportion of our adult health,” as Stephen Bezruchka explained last week, gets programmed in the early years of a child’s life. Given this reality, guaranteeing every child the best possible supports in the early years ought to be priority number one for any society committed to better health for all.
But unequal nations do precious little of this guaranteeing. The nations with thehighest ranking for child well-being turn out to be the nations with the most equal distributions of income.
Can the United States change course on health? Will Americans in the future be able to look forward to living lives as long as people in other developed nations?
Japan may offer the most encouraging precedent. In the middle of the 20th century, Japan ranked as a deeply unequal and unhealthy nation. But since the 1950s Japan has become a much more equal society, one of the world’s most equal, and, on life expectancy, Japan now ranks number one globally.
The United States, over the same span of time, has gone in the exact opposite direction. We have become the world’s most unequal major nation, with health outcomes among the developed world’s worst.
So how do we start a turnaround? Most Americans, Stephen Bezruchka notes, already understand the concept of “vital signs.”
“We can sense these vital signs tell us something significant about our individual health,” he notes, “every time we step on a scale at the doctor’s office or feel a blood pressure cuff tighten.”
But societies have “vital signs,” too, with none more important to health than our level of inequality. We need to start recognizing these broader “vital signs.” If we do, Bezruchka believes, we can make a difference.
“Dying so much younger than we should,” he sums up, “can be changed.”