This upcoming Sunday, January 17th, marks the 25th anniversary of the beginning of Desert Storm, a.k.a. the Gulf War, a.k.a. The First Iraq War. Since then, the US Air Force has flown combat missions over the northern and southern Iraqi “no fly zones,” combat missions in Operation Desert Fox and the Second Iraq War, combat patrols in the aftermath of that war, and now combat missions vs. the Islamic State. That is 25 years of unceasing combat for the Air Force (and also the aviators of the US Navy) in the greater Persian Gulf region. The period encompasses the administrations of four consecutive US presidencies. Additionally, US forces had been actively engaged in combat operations in the region under the previous two presidencies, Reagan and Carter. Indeed, the roots of this engagement are found in The Carter Doctrine, which also has an anniversary approaching. President Carter, in his final State of the Union address on January 23, 1980, committed the United States to becoming the fulcrum of power in the Persian Gulf in order to secure our national interests there. Oil being the lifeblood of the national and international economies and the Persian Gulf being the largest single repository of “easy oil,” those interests are substantial – the total cost of US operations in the region since 1/23/80 are over 7000 service members killed, over 50,000 wounded and trillions of dollars spent.
Those lives lost and damaged are tragic – the real best and brightest of the last several generations. We owe it to them to continually question whether the Carter Doctrine has been worth their sacrifices. While it is true that we as a nation could have chosen to funnel all that money and effort into searching for alternative energy sources that would negate the importance of the Gulf region, it remains true that there is no such source on the horizon that equals the what we get from oil. So, for their sacrifices, the men and women of the military (and the taxpayers who fund them) have given us decades of relative peace and prosperity. That run is being tested today, so my conclusion is not final and is subject to revision, but my honor and salute to those who have been serving on that front line for so long is not.
The discussion surrounding French economist Thomas Piketty’s new release is invigorating, and I am eager to join in. Let me begin by noting that I am not an economist, and I am not even an interested amateur – I have next to no formal education in the field. Let me next admit that I have only skimmed the book at this point, but I have read the key parts and I think my general understanding of the argument is clear, at least as confirmed by reading some of the more comprehensive reviews.
Piketty’s chief claim is that the rate of return on capital (r) is greater than the overall growth of the economy (g), and when this ratio gets out of balance, it necessarily creates great inequality. As he puts it himself:
If, moreover, the rate of return on capital remains significantly above the growth rate for an extended period of time (which is more likely when the growth rate is low, though not automatic), then the risk of divergence in the distribution of wealth is very high…
I added the bolding, because it seems to me that these are key restrictions on the argument.
r > g is elegant and alluring . . . but instead let’s say that Inequality (I) = r/g
I = r/g
The key element, then, is not the numerator r but rather the denominator, g. any serious policy objective has to be focused in increasing g. Piketty assumes a that g has become, and will remain, very low and nearly constant. This is a symptom of our age, which is terribly pessimistic. His wealth tax solution is focused on the numerator where one could predict it will have a marginal impact on I; indeed, a too strong application could reduce g even further and make I even higher!
Better to focus on g, and that means first of all questioning Piketty’s key assumption that g is destined to remain low for the foreseeable future. But often the phrase “foreseeable future” is an oxymoron, no?
As a student of long cycle theory, I see the regular cyclic phases of roughly a century, but in practice anywhere from 70 to 125 years. Each of these cycles is triggered, in part if not in all, by by some innovation that changes the economic order. The fruits of that innovation are bountiful at first but necessarily wear out over time. We are in the end phase of one such cycle right now, hence the apparent stagnation and resultant pessimism. But if the past is any guide – and it usually is – then the world will experience a new and unforeseen burst from a new innovation, sometime within the next few decades.
As a researcher focues on energy I am biased, of course, but I think that innovation is going to come from the energy sector, and I think it is going to come sooner rather than later. The economic growth of the world has been powered for the last two cycles by fossil fuels, and the general pessimism about future growth is in large part fueled by a widespread belief that fossil fuels are either running out, poisoning us, destroying the climate, or any combination of the three. This is the weltanschaung of our age – the energy which has made us richer as a species than ever before is now in many ways our enemy.
I do not share this pessimism. I am a technological positivist, and I see signs and portents from all over the world that we are on the cusp of an energy revolution. This may mean the discovery and/or perfection of a new energy source, or simply a cleaner and more efficient way of utilizing the still abundant supplies of fossil fuels. But there are going to be breakthroughs – hydrogen, storage capacities for wind and solar, safe thorium nuclear power, hybrid gas-nuclear reactors, the methanol economy – that change the energy equation and open a new century of growth and prosperity. When that happens, when g is annually 3% or greater instead of the 1 to 1.5 assumed by Piketty, his “Capital in the 21st Century,” if it is remembered at all, is going to have to be retitled “Capital For a Brief Moment in the First and Second Decades of the 21st Century.”
I am in a transition period and posting will be both irregular and less frequent for a couple of weeks. I will, however, continue microblogging via Twitter, so you can keep up with my regular interests there.
The Stockholm International Peace Research Institute (SIPRI) has released its annual report on global military spending, and has found that spending has increased in every region of the globe – except the US and its European allies.
Power, like nature itself, abhors a vacuum. As the West declines, other powers rush to fill the gap. The EU, today, sees events in Ukraine as a wake up call and is set to increase defense budgets. The US, constrained by sequestration, is not – but doesn’t need to. The US only needs to spend wisely – of course, it takes a kind of seriousness and courage rarely seen in budgeters to hack through all the politically protected items in the Pentagon budget. We won’t get everything, but hopefully we can get enough.
India is building “solar canals” – covering existing irrigation canals with solar panels, producing energy and limiting evaporation at the same time. Brilliant.