There's a lot of senseless optimism here at CAPS now. Far from the usual uber-bearishness that we have from alstry & company, we now have relentless bullishness. #7 on CAPS Porter, and top 20 member Tigerpack have successfully riden the bear market rally to new highs in their CAPS scores. People like Tigerpack are now claiming we're going to get a 500 point up move in the dow in the next week. Is he full of it? Simply, yes. This rally, like all the others of the past two years, will soon end. First and foremost, interest rates are exploding higher. Check out the TNX or TYX charts to see this in graphic detail. The TNX (10-year govt. bond) is now over 3.00% after falling to 2.03%. The 30-year bond interest rate has increased just as rapidly. This means that mortgage rates are quickly rising meaning that what little unfreezing in the credit markets is about to be undone. No credit>falling consumer ability to purchase>falling earnings. [more]
I turned in the following paper for a political science class about sustainable development. I probably just threw my grade in the class away, but, um, if the assignment is to write a paper using a variety of stuff we've read in class and the range of materials is from "Leftist" to "Marxist", what is an avowed capitalist to do? Anyway, I think this is interesting reading material. Do you agree or disagree with my thesis that sustainable development movement is a guise under which leftists attack private enterprise?
Evaluating Sustainable Development Policies
The question of how one approaches sustainable development is one that remains hotly contested throughout academic literature today. As Steve Connelly points out, sustainable development means a lot of things to different people. He writes that sustainable development, “has a widely accepted but vague core meaning within which there are differing 'conceptions of the concept'--legitimate, yet incompatible and contested interpretations of how the concept should be put into practice (Connelly, 2007.) Despite the widely varying gulf of opinions that one finds when exploring how the concepts within sustainable development should be implemented, it seems there are some basic principles that should be widely applicable regardless of ones own political or economic inclinations.
It would seem that the crucial elements of any perspective policy would be how many benefits does it provide and how much does it cost. One must also ask how equally the benefits and costs are distributed. A policy of, say, mandating that every computer owner purchase Windows Vista would greatly enrich a few men—the executives of Microsoft—while making ninety-nine percent of society poorer. That said, we must look for policies that create sustainable development for as many people as possible with as little cost as possible. Focusing on the negative externalities of policies is also crucial. A policy may sound good on paper, but we must explore what actually happens if the policy is enacted to see if the policy is sound. A policy that, say, taxes carbon emissions to a severe degree sounds good. However, the inevitable result is that businesses will flee to an area that doesn't have strict mandates on carbon emissions. A ton of Chinese made carbon emissions is just as damaging to the environment as a ton of American made carbon.
However, speaking of carbon, one must also take into consideration the quality of the harm being fixed by a sustainable policy. Is fighting global warming—a theory that doesn't even have a consensus of scientists supporting it—as important as fighting say indoor air pollution in Africa? (Bezek, 2009.) In one case, we are fighting the alleged dangers of an unproven and unknown potential menace where in the other case, tens of thousands of people are dying of a preventable cause. Which is more important? This is the sort of question we must act before enacting widely-sweeping policies which have the potential to cause great economic and social change.
All that being said, I believe there are a few conditions that are clear to making good policy. The first is that voluntary policies are preferable to mandatory policies. I admit that I may be biased as I am a libertarian with anarchist leanings who also is studying the dismal science—economics--but it is clear from my years of study that policies that are enacted by force never seem to work out as well as solutions which voluntarily allow individuals, societal entities, and corporations to voluntarily modify and improve their behavior. The second guiding principle should be that we must emphasize policies which create immediate measurable benefits. The environmental movement has looked foolish with its past crusades against non-threats such as the so-called “population bomb” and the acid rain scare a couple decades back. By fighting known hazards such as asthma-promoting smog, cancer-causing water pollution and the like, sustainability development can gain credibility with all of the political spectrum as a solution to numerous societal problems rather than just being viewed as an instrument of the left to fight capitalism as it is commonly perceived by the Republican Right at present (Milloy, 2009.)
This line of reasoning may sound cold and detached. Cost-benefit analysis, while a mainstay of economic theory, is often viewed in a negative light. By removing emotion from the discussion, economics appears to be, at times, an inhumane science. However, the example of the destruction of the Canadian cod shows in stunning detail just how government mandates, which seem compassionate, can backfire. A Canadian philosopher, Stefan Molyneux, explains. He talks about how the cod were a resource so great that explorers marveled about it. During the 1960s, the cod population started to decline as industrial fishing set in. However, as the cod stock declined, the industrial fishing left the area, leaving the fish resources to the local population. The cod population stabilized and remained healthy.
However, in 1977, the Canadian government intervened and decided to begin to interfere in the native fishermens' industry. The government established fish processing plants and subsidized the construction of new fishing vessels. Slowly, people moved from dependence on the fish population to dependence on the government jobs and subsidies. Why would the government do this? Molyneux explains: “For popularity of course [. . .] but also for the increased taxes that come from a higher level of economic activity.” This is an interesting point, government—far from being the unbiased paradigm of rational decision-making it is held up to be—is as self-interested as any corporation. It acts, of course, in a way that furthers its own ends. By workings towards higher popularity and more tax revenue, the government ensured the destruction of the cod.
As the fish population started to go into terminal decline, the government decided to implement a quota system on fishermen to try to preserve the population. However, the quotas were set too high, as Molyneux explains, “No politician wanted to face the wrath of the fishermen by telling them that they were not allowed to catch as much as they wanted – or felt they needed to survive.” Soon, it was discovered that the scientific models (and remember that global warming theory is entirely based on similar models) of fish population were dead wrong. The Canadian government in 1989 mandated that the quotas be cut by half but by then it was too late—the fish population was almost entirely destroyed. What started as a nice-sounding measure, I can just imagine a politician saying, “let's just help those hard-working fishermen develop their communities a bit,” ending with the destruction of the fishermens' way of life along with the annihilation of a vibrant aquatic ecosystem (Molyneux, 2006.)
It is difficult to write this paper while incorporating the sources discussed in class. I just flat out disagree with the arguments proposed by people like Bendell. When he says that, “Industry self-regulation is an oxymoron,” it is hard to take him seriously. (Bendell, 2000.) He commits an elementary logical fallacy within his introduction by saying, “Hurricane 'Mitch'[. . .]killed approximately 20,000 people[. . .]For the people left to rebuild their lives, climate change is not a theory.” This is a basic post hoc ergo propter hoc logical fallacy. The translation of the Latin phrase is, “after this therefore because of this.” Wow, there was a hurricane, well then, must be global warming's fault. Trying to write a paper based on a variety of hard leftist sources who pepper their papers with logical fallacies is a difficult task.
As was discussed in the class, we haven't covered the point of view (libertarian market-based policies) that I believe. Just about every article we've read takes a negative view towards the policies that I support. It seems as if the green movement has its crosshairs on capitalism itself. John Saul argues that the “wild-open market” theory of capitalism “died in 1929” (Saul, 2004.) This is such a bold—and ignorant—statement, just look at Hong Kong's economy for disproof of this, that I, the reader had my intelligence insulted. Now Saul equally foolishly claims that globalization is dead. Likewise, Bendall argues that, “Hypercapitalism is spiraling out of control, becoming disconnected from the people living in its midst. This disconnection is heightening the negative social an environmental consequences of the growth paradigm (Bendall, 2000.) I fully disagree, globalization has largely been a force of good, bringing economic development around the world.
All of this said, it's difficult to formulate sustainable development policies based off material from class when I am diametrically opposed to most of the policies suggested. Carbon taxes or cap and trade policies world amount to little more than a disastrous tax on economies as a whole, for example. Carbon emissions are directly correlated to economic progress—thus capping carbon is equivalent to capping progress. And all this to fight an unproven and probably mythical enemy in global warming. Carbon taxes are inherently opposed to sustainable development as they kill economic development. You simply can't grow a modern economy without carbon emissions, and anyone that truly valued the economic part of the map that Steve Connelly discusses would flatly reject carbon taxes.
Among the few policies in class that we've discussed from the private realm are fair trade grown products. Fair trade is a great piece of sustainable development as it is both voluntary and features a high benefit versus its costs. Giving companies and individuals the chance to voluntarily support workers in developing nations is a laudable goal. As Peter Taylor pointed out, “Although measuring monetary benefits is difficult, Fair Trade does contribute direct and indirect benefits to small-scale farmers” (Taylor, 2004.) However, most policies put forward under the guise of sustainable development seek no economic development at all. The New Scientist magazine clearly illustrates this, saying economic growth is okay, “only as long as it doesn't breach the limits set by ecologists” (New Scientist, 2008.) I can assure you that ecologists would make terrible economists, this sort of call for scientists to set economic policy will lead to disaster.
For an example of how we don't need government mandated green policies, take a look at the mining operations of Cameco right next door to us in Southeastern Wyoming. Their uranium mining operations are so safe that they can raise cattle on land on top of their mines. They provide the world with clean, safe, and reliable carbon-free energy. Throughout their website one finds vast amounts of real estate devoted to education about nuclear energy, statements about their commitment to sustainable development, and myriad environmental statistics shedding the light of accountability onto their operations. Cameco doesn't need the government to tell them to be a good corporate citizen, they've already decided that going green is the best way to manage their business. We can see from Cameco that Bendell's claim of the inefficiency of industry self-regulation is inaccurate.
What one should really be asking is how effective government self-regulation is. Besides the slaughter of the cod mentioned previously, it is important to realize just how damaging the government is. For instance, the US Department of Defense uses 365 thousand barrels of oil a day—equivalent to the consumption of the nation of Greece (Karbuz, 2006.) Forcing people to buy CFL lighting, for instance, while ignoring the army's colossal usage of fuel is shameful. For a more shocking example of government destruction of the environment, look at the waters off the coast of Somalia. The governments of European nations have allegedly been paying the Italian Mafia to dispose of health wastes, toxic waste and even radioactive waste in the waters of Somalia causing hundreds of human casualties and untold illnesses (Hari, 2009). There's the wonderful European public health care systems at work—saving costs by killing Africans. It's no surprise pirate attacks have risen to counter the environmental tragedy perpetuated by Europe. As British journalist Johann Hari wrote, “Did we expect starving Somalians to stand passively on their beaches, paddling in our nuclear waste?” (Hari, 2009.)
The governments of the world simply can't be trusted with control over the environment. Thus, any discussion of sustainable development must focus on voluntary policies. Market mechanisms work, corporations can be shamed into better practices. However, government mandates have failed, are failing, and will continue to fail. Besides a focus on voluntarism, the other crucial criterion is an emphasis on the cost-benefit analyses of our policies. We have limited resources to fight a nearly infinite variety of problems. We must stop throwing our money, research, and passion at illusionary or irrelevant issues such as global warming and focus on areas where we can affect immediate positive benefits. More than that, sustainable development, as a movement, must drop its opposition to capitalism—sustainable development is supposed to focus on economic, social, and environmental progress, however, as an economist, I can confidently tell you that most sustainable development approaches would cause economic contractions.
Until the green movement is willing to treat capitalism fairly, it will be impossible for those of us who believe in the free markets to create a series of criteria that would actively create sustainable development. We can't compromise with a movement that promotes policies that destroy free enterprise. When Jem Bendell writes, “The environmental degradation and social dislocation we are facing is a direct result of[. . .]the idea that increasing the production, consumption and amount of money changing hands in an economy is intrinsically good for society,” he proves that the whole framework of sustainable development is a fraud as it presently stands. Bendell wants to halt economic growth, and in doing so, proves he—and the sustainability movement he supports—is hypocritical.
Bendell, Jem. “Civil Regulation: A New Form of Democratic Governance For The Global Economy?” New Academy of Business. 2000.
Bezek, Ian. “Are 31,000 Skeptical Scientists Wrong About The Global Warming Debate?” Rocky Mountain Collegian. March 24, 2009.
Bezek, Ian. “African Oil Supplies Funds For Unspeakable Tragedy.” Rocky Mountain Collegian. March 31, 2009.
Connelly, Steve. “Mapping Sustainable Development As A Contested Concept.” Local Environment. Vol 12, No. 3. June 2007.
Dicken, Peter. “Global Shift: Mapping The Changing Contours Of The World Economy. 5th Edition. New York: The Guilford Press, 2007.
Hari, Johann. “You Are Being Lied To About The Pirates.” The Huffington Post. April 13, 2009. Accessed April 13, 2009.
Karbuz, Sohbet. “Long Live The Pentagon.” Energy Bulletin. October 13, 2006. Accessed April 15, 2009.
Milloy, Steven. “Green Hell.” Washington D.C.: Regnery Publishing, 2009.
Molyneux, Stefan. “So Long And Thanks For All The Fish!” Freedomain. March 6, 2006. Accessed April 11, 2009.
Saul, John Ralston. “The Collapse Of Globalism.” Harpers Magazine. March 2004.
“Special Report: Life In A Land Without Growth.” New Scientist Magazine. 15 October 2008.
“Sustainable Development.” Cameco Corporation Website. 2009. Accessed April 14, 2009.
Taylor, Peter Leigh. “In The Market But Not Of It.” World Development Vol. 33, No. 1. July, 2004. [more]
We're getting close to the optimal short point, but we aren't quite there. The late surge in financials was both powerful and surprising. We must now wait until a new topping process begins--next week--I thought we had a top yesterday, but apparently not quite. Once we put in a top (hopefully at 870, that'd be ideal) we will either get A) a significant correction and then one last bull gasp higher or B) a new bear trend taking us back towards the lows. If we roll over from under 850, a correction is more probable while if we reach 870 or higher (the 200 DMA is still way up there) we should conclude this bear market rally and return to our regularly scheduled sickening declines. I think we will get an optimal shorting opportunity in the next two weeks to position for a 10%+ decline, however, the close today gives me pause. Let's see what Monday looks like before getting too aggressively on the bear boat. [more]