Archive for May, 2009

Cap: END TRADE

May 26, 2009

I am not a scientist, but I am also unsure anyone can claim with a 100% certainty that global warming is a consequence of human behavior. I don’t think I am going too far afield stating that some pollutants, whether or not they are causing climate change, are harming world health.

A planet in orbit spinning on an axis along with prevailing winds and shifting weather patterns cause pollutants spewing from any facility to often rest far from their origination.

If there is something all nations commonly share, it is the entrapment in the atmosphere of pollutants. Airborne particles and gases, even if the concentration originates in one geographic area will, come to rest throughout the globe.

India and China together account for about one-third of the worldwide population and both countries are heavily committed to coal generation for about 80% of their current power requirements. Their needs are growing exponentially and China has recently been credited as the world’s largest polluter, displacing the United States, which held that title for decades.

The greenhouse gas phobia, particularly with respect to CO2 emissions, is largely overstated. Quoting a joint study between Zogby Associates and The Manhattan Institute’s Center for Energy and Environment: the burning of fossil fuels is responsible for just 3.27% of the carbon dioxide that enters the atmosphere each year, while the biosphere and oceans account for 55.28% and 41.5% respectively. This is statistically interesting given that 63% of people from the same survey believe human activity is the greatest source of greenhouse gases.

The current thrust toward a European Cap and Trade system also has flaws. There has not been any significant decrease in either particles or greenhouse gases since the system was enacted in Europe. In 2008 the first marginal decline was registered. A function of Cap and Trade or the results of Europe’s 19% drop in industrial production?

Ultimately, the United States must derive power from renewable energy resources. But we must also learn from past mistakes. As corn-based ethanol was quickly deemed the panacea for high energy prices, the previous administration enacted thoughtless legislation without truly examining the unexpected consequences of higher food costs and taxpayer subsidies.

The European model of Cap and Trade has apparently not worked, but it has increased energy costs and in turn increased the cost of power vital to manufacturing. Does Congress feel they can make a failed example work or will new legislation produce an even larger failure? Foreign governments are already bristling at a possible “Clean Energy Trade Policy” which could be enacted by the United States.

I fear that should our diminishing manufacturing base become even less globally competitive that we will try to economically blackmail countries that do not abide by standards we impose. Protectionist policies, regardless of how they are disguised, have never succeeded historically. The problem needs to be addressed through a partnership of private industry and government along with comprehensive global pacts.

The movement away from fossil fuels needs to be gradual otherwise the shock to our own economy may create another crisis. The worst approach is to capriciously spend trillions of dollars to reduce pollutants by a miniscule amount while fooling the American taxpayers about the legitimacy of the plan. A thoughtful, cohesive and intelligent approach is necessary and reducing pollution needs to be a global endeavor and priority.  

 

LOGIC – A Forgotten Word

May 22, 2009

In March 2009 the prestigious Kaufman Foundation did a study that identified 78% of Americans as believing innovation is important to our economic health, while indicating that only 3% of Americans feel the stimulus package will encourage innovation.

Although the stimulus package contains many provisions and earmarks, there is one item notably absent. Usually government programs set aside about 25% for small businesses to help the less-than-mighty companies compete with the corporate giants. For unfathomable political reasons, small enterprises have been overlooked for the largest economic program ever enacted by Congress.

I am beginning to see climate change not just in Al Gore’s movie, but also in government’s attitude toward business, anger spilling out in all directions and trickling down to small businesses, which did little to cause the current calamity.

Although the financial crisis has illuminated the often-deceptive and unethical methods, banks, insurance and financial companies practice, these companies have been allowed to persist and are likely to resume their old ways through the largess of Congress at the expense of the American taxpayer. The rules and regulations being contemplated to avoid a similar financial catastrophe are aimed at these large firms, but they will also affect small business.

For ranchers, charismatic shipping magnates and wealthy local newspaper editors, these regulations will require more government reports, more accounting and likely higher taxes. This time the trickle down theory is likely to work in an unexpected way.

It appears that high taxes and over-regulation cause higher unemployment. According to CEO Magazine (March/April), the three states offering the worst business environment and the highest taxes, California, New York and Michigan, are topping the list for the highest unemployment. These states are also the largest recipients of state and corporate federal welfare.

It seems propping up the too-big-to-fail multinationals is a misguided strategy for several reasons. It may be my own Darwinism or a fondness for the ‘creative destruction’ theory, but if a company has been mismanaged, like Chrysler, GM, AIG, Bank of America and others, it should be allowed to fail leaving room for others to take their place. By nature, all businesses have to commit to profit, but multinationals tend to focus in the most economical market and in the least expensive places. Conversely, small businesses in America account for more than 50% of the GDP and provide relevant innovation and employ local people.

Logically, government intervention in any form should be directed to the heart of American enterprise—the small business—and not funneled to failing companies with abysmal track records.