Populist movements don't build themselves ...

... It doesn't matter what the "horse race" outcome of the campaign is, if we fight the campaign. Fighting it, we learn how to fight. Learning how to fight political battles, we become citizens again. Becoming citizens again, we reclaim the Republic that lies dormant beneath the bread and circuses of modern American society.

Tuesday, May 26, 2009

What can Newspaper Reporting learn from Yuricon? ...

Join the conversation out in the blogosphere: Published at Docudharma, cross-posted to ProgressiveBlue, Daily Kos, MLW, European Tribune

Burning the Midnight Oil for Breaking the Silicon Cage

... and Yuri Monogatari 6?

Yuri ... a micro-niche market
Yuri Monogawho?

Yuri Monogatari 6 is the latest issue of the annual anthology of "yuri" themed short comics, published by ALC, the publishing arm of Yuricon, a group that promotes yuri anime and manga through an annual convention ... Yuricon ... as well as publishing yuri works.

And, for those with little or no contact with Japanese manga and anime culture ... what is yuri?

According to The Mighty Wikipedia:
... the term yuri is used in Japan to mean the depiction of attraction between women (whether sexual or romantic, explicit or implied) in manga, anime, and related entertainment media, as well as the genre of stories primarily dealing with this content

Or, as it explained on the Yuricon website:
Yuri can be used to describe any anime or manga series (or other thing, i.e., fan fiction, film, etc.) that shows intense emotional connection, romantic love or physical desire between women. Yuri is not a genre confined by the gender or age of the audience, but by the *perception* of the audience. We can, if we want to, differentiate between shounen yuri - written by men for a primarily male audience; shoujo yuri - written by women for a primarily female audience and; what we at Yuricon like to think of as "pure" yuri - written by lesbians for a lesbian audience...but it's still all yuri.

In short, yuri is any story with women in love (or lust) with other women.

Now, manga and anime is a niche market in the United States. And yuri is a relatively small niche within that niche. And further, much of the yuri is puerile garbage peddling fantasies of HAWT lesbo SEX to teenage boys, so the kind of yuri that Yuricon celebrates and promotes in its publications, well, that's a niche in a niche in a niche.

A micro-niche, if you will.

To get more of a tease of what Yuri Monogatori is, Yuricon has a trailer for its manga:

Why does newspaper reporting need to learn lessons?

So, why should newspaper reporting be out looking to learn lessons?

The big challenge facing newspaper journalism is reasonably straightforward: the basic newspaper business model is broken and unfixable, and the large majority of newspapers built on the current model are going to go bust. As Clay Shirky said in Newspapers and Thinking the Unthinkable:
If you want to know why newspapers are in such trouble, the most salient fact is this: Printing presses are terrifically expensive to set up and to run. This bit of economics, normal since Gutenberg, limits competition while creating positive returns to scale for the press owner, a happy pair of economic effects that feed on each other. ...
For a long time, longer than anyone in the newspaper business has been alive in fact, print journalism has been intertwined with these economics. The expense of printing created an environment where Wal-Mart was willing to subsidize the Baghdad bureau. This wasn’t because of any deep link between advertising and reporting, nor was it about any real desire on the part of Wal-Mart to have their marketing budget go to international correspondents. It was just an accident. Advertisers had little choice other than to have their money used that way, since they didn’t really have any other vehicle for display ads.
The competition-deflecting effects of printing cost got destroyed by the internet, where everyone pays for the infrastructure, and then everyone gets to use it. And when Wal-Mart, and the local Maytag dealer, and the law firm hiring a secretary, and that kid down the block selling his bike, were all able to use that infrastructure to get out of their old relationship with the publisher, they did. They’d never really signed up to fund the Baghdad bureau anyway.

Now, that raises two problems. For people that work in the industry, or own stock in the industry, or sell supplies to the industry, well, they get to join the large queue of people with a stake in the country getting off its three decade long "kill industries off" kick and starting to develop new industries.

There is, however, the social problem as well:
Print media does much of society’s heavy journalistic lifting, from flooding the zone — covering every angle of a huge story — to the daily grind of attending the City Council meeting, just in case. This coverage creates benefits even for people who aren’t newspaper readers, because the work of print journalists is used by everyone from politicians to district attorneys to talk radio hosts to bloggers. The newspaper people often note that newspapers benefit society as a whole. This is true, but irrelevant to the problem at hand; “You’re gonna miss us when we’re gone!” has never been much of a business model. So who covers all that news if some significant fraction of the currently employed newspaper people lose their jobs?

I don’t know. Nobody knows. We’re collectively living through 1500, when it’s easier to see what’s broken than what will replace it. The internet turns 40 this fall. Access by the general public is less than half that age. Web use, as a normal part of life for a majority of the developed world, is less than half that age. We just got here. Even the revolutionaries can’t predict what will happen.

That's why newspaper journalism needs to be out learning lessons from somebody ... because the old model in which economies of scale led to an incentive to have a sufficient pool of journalists on tap able to cover the big stories when they break, to protect the local market from incursion ... that model is breaking down, and can't be rescued.

OK ... so why might there be lessons to learn from a microniche publisher? Well, because that's what a lot of newspaper journalism addresses. The local reporters covering City Hall and local sports and local events ... those are addressing the interest of a fraction of a local "audience for news". And while the "big stories" with bigger niche audiences are likely to continue being covered by the surviving national newspapers ... its the smallest audiences that face the greatest risk of losing the journalism addressing their interests.

Five Things Niche Companies Do Right

I am going to quote Erica Friedman at length, so to keep it in something like reasonable bounds, I am going to tell you to go, read, and think about Five Things Niche Companies Do Wrong, to understand what the following list means: (1) Don't Plan; (2) Fear Change; (3) Forget to Communicate; (4) Listen to People; (5) Don't Listen to Good Advice. They are all good ... even if #4 might sound surprising at first hearing, when you catch what it means, its excellent advice.

But for the current topic, more to the point is what niche companies do right.

Treat Consumers like Friends

One of the undeniable facts about fandoms over general consumer markets is that your consumers are the "fans" of the product. They will act as if they have a personal stake in the product ...

As a niche company, we have the right and the power to be friendly with our consumers - to talk to them when they come into the store or up to a table at an event, or get emails from them, and respond personally. If we truly engage with the fans, they will feel even *more* involved with the product and if they like it, they will spread the word.

Now, before you say, the reporter that acts this way will never have time to get work done ... don't overlook a key point. Be friendly with our consumers. Paying customers. The question is not whether a newspaper reporter in a post-newspaper world will have the time to take away from their reporting to interact with their paying customers ... but whether they will have time to report if they don't.

Be flexible

When the standard methods lead to a shrinking market, looking way outside your comfort zone is the best way to grow.

Recently, all the press has been on the young teen female readers, but you know, manga's already done there. ...

So, when while every company is scrambling to be the next Twilight, which is already a bad idea, Viz announced a bunch of licences at NY Comic Con that appealed to a more mature readership. And, I am assured, are mostly off-beat and unusual.

This is the company that made the tween/teen manga world explode here with utterly banal, insansely popular Shounen Jump and Shoujo Beat magazines. And now, all of a sudden, they are looking to more mature manga? Why? They had a winning formula! Because young people grow up and if you have a 15 year old, in a few years, that kid is not gonna want to read about 15-year old ninjas anymore. Viz took the leap out of the typical, to the real *next* audience. Adults. I have no doubt at all that it will be successful.

Newspaper reporting is a team exercise ... different reporters go collect different information, editors look over the writing and material, etc. Will the successful formula for engaging in newspaper reporting outside the confines of a newspaper involve the precise same roles and the conventional division of responsibilities? Quite possibly not. It may have to be a more flexible team, with more fluid division of responsibilities.

Without the flexibility to experiment in new ways of doing things, the successful new ways of doing things will not emerge.

Listen to feedback

Provide instant response to a market change, then let people know you heard them.

Nozomi/Right Stuf announced this crazy idea. They were going to license a completely, utterly, shoujo title. ... was about a bunch of girls who go to a private school, where nothing really happens. ...

But Right Stuf knew that this particular fandom was built by a few key entities who actually encouraged purchase, so they took the risk and licensed Maria-sama ga Miteru. Now here's the thing. They did a subtitles-only release, because it seemed obvious that the majority of the consumers wanted that over a dub. But when word of the subtitling started to spread, fans expressed concerns about the specific handling of honorifics and titles used in the story. RS was deluged with requests and entreaties for a non-tranlslated handling of the titles. And, they listened. Think about that. They changed the way they did their releases because fans asked politely for a different option. And they let the fans know - immediately. They didn't keep fans guessing, they jumped right on it and responded with "We heard you! We'll do it!" I can think of a number of issues that have *not* been addressed after waves of fan mail, but this is the first time I've seen an almost instant response of this magnitude.

This is where the "newspaper reporting without newspapers" is going to have a jump over the hold-out remnants of the old order ... if they choose to take it. They will be finding some way to sell reporting to a small niche of people willing to pay for reporting. They will be operating without the massive capital overhead of a printing press. They will be operating for the most part without the legacy of a decades or centuries old masthead.

But they will be able to get much more immediate feedback from their subscribers / viewing audience / (whatever) ... and if they treat it appropriately (and see "Don't Listen To People" in the companion piece linked to above), they will have access to information about their market that they couldn't buy even if they could afford to.

IOW, this is "small, warm blooded mammals scurrying around the undergrowth while the Dinosaurs keel over dying" time, and part of the scurrying is the listening to feedback.

Reward engagement

Everyone wants to be a hero. I claim my own Okazu blog as best of breed in this. I love the fact that you, my readers, are so engaged. I started the Wish List as a result of *your* emails and comments, asking if you could help support Okazu. And I know that people want to be heros. Well - you are my heros. And so I created the "Okazu Hero" roll and sent you badges to let you and anyone who drops by this blog, that I consider you all my heros.

The result? I can't keep items on my freaking wishlist! You all are so crazy generous, I have 4 piles of things to read and watch and review here, and 5th building. I didn't give you a free car - but I let you know you are my heros. And honestly, that's all anyone ever wants.

(BTW, I'm an Okazu Hero ... not a Super-Hero, but a Hero, nonetheless ... and in any event, its best if our reach exceeds our grasp.)

Talk about opportunities and benefits to rewarding engagement ... in many cases, the people interested enough in a micro-niche of news will be people who also have tips to pass on.

Indeed, this is one element that many newspaper reporters will already have to a certain extent. On the one hand, the sources who are willing to offer insight into an issue in return for getting their name, position, and company or university in print. On the other hand, the sources who do not want their name to appear but want the story to get out.

But perhaps as newspaper reporting breaks free of the printing press, ways will need to be found to leverage the idea further.

There is also, of course, the flipside ... the issue of conflict of interest. If we are lucky, those "reporting teams without a printing press" that are rewarding people for helping get the story out will be rewarded by their audience with a broader market ... but human nature being what it is, the potential for conflicts of interest is something to keep an eye out for.

There is one area where the conflict of interest is likely to be least intense ... and that is marketing. The reward of a membership (or whatever) that one would ordinarily have to pay for, in return for help with marketing ... that is a reward that is of the most interest with precisely those one wants to have help marketing the product.

Go with your gut

Recently on LinkedIn, I answered a question. The person asked what he should do now that the result of a market feasibility study had proved that his concept wasn't going to work. In short, I told him that consumers rarely know what they want until after it exists. (Quick, summarize your favorite series, and synopsize it. Now tell someone about it. Would you have wanted it with that description? Probably not.) So, he had two choices - to rethink everything based on a market feasbility study, or to go with his gut. Both would be equally as risky, but only one would make him happy.

ALC Publishing is a boutique publisher, which focuses on bringing doujinshi Yuri artists to the view of the reading audience. We're not trying to license Strawberry Panic. My gut tells me that when other companies are long gone, we'll still be around, because we don't do alot - but we do what *I* love and many people have come to love it as well. That's all we ever wanted, so...I'm going with my gut.

This is one area where a lean, trim, reporting team (speaking in terms of organizational structure, of course) can benefit strongly by breaking free of the corporate ownership of the masthead and the printing press. They have the freedom to go with their gut. Sure, they have to argue it out with their fellow team members ... but in terms of the strength of the story, rather than in terms of whether it will help the corporation get 30% profits (and it wasn't so long ago that newspapers were cash cows that had reporters sacked to get profits up to dizzying levels, rather than simply to stay alive, as today).

So, in the end, I'm thinking there may be a lesson or two for newspaper reporting to learn from a microniche publisher, if it wants to survive the demise of the newspapers themselves.

Full Disclosure

There is circularity in this post, since if I link to the ALC site that is selling Yuri Monogatori site, while discussing it, in a social networking site that I use, I get 5 points. Include the Trailer, I get 10 points (not extra ... a total of 10 points). So with the three postings of this diary, I earn 30 points. Now, with 50 points comes a free copy of Yuri Monogatori 6.

While I will buy the anime that I like the most, I am not in the habit of reading manga. However, the prospect of a free copy ... that is something that is hard to pass up. So if anyone can hustle up the missing 20 points in additional social networking sites ... it doesn't have to be blogs, it could be whatever social networking site that you frequent ... and its a legit posting, why, I reckon that together we can earn a copy.

Heck, I'll even let the person who finishes the missing 20 points get the manga shipped to them. How's that for generous?

Anyway ... "Reward Engagement" in action. Erica practices what she preaches.

Monday, May 25, 2009

So that we won't need a Memorial Day for the US economy

... or perhaps that should be, so we no longer need a memorial day for the US economy.

In It need not be a calamity, I wrote:
But ... well, we know this. We have known since the 1970's that we would become increasingly dependent under the Old Energy Economy. We have known since the 1970's that our four centuries of energy self-sufficiency since European Settlement of the eastern seaboard of North America would be coming to an end unless we made substantial changes.

And then our ruling elites collectively decided to pretend that social division of national product is a more fundamental question than the ability to continue producing it, and we descended into the last thirty years of the wealthy focusing in grabbing a bigger share of the pie, while assuming that the baking of the pie would magically take care of itself.

Of course, the radical reactionary movement to roll back not just the Democratic Roosevelt's New Deal, but the Republican Roosevelt's Square Deal as well did not start in 1980. It has been with us for quite a while. It reached the point of being able to capture a "major party" nomination in 1964.

But, clearly, a potential governing coalition had not been worked out by 1964. That began to be stitched together by Nixon and his Southern Strategy. Despite representing too much of the Eisenhower style accommodation with the post-WWII version of pro-middle class economic policies ... to much for the radical reactionaries, that is ... Nixon showed the way in terms of a governing political coalition.

And then Reagan ... the Sainted Ronnie Raygun ... stitched the coalition together, the cynical combination of racist voters, socially conservative voters, and libertarian leaning voters in service of the dissolution of the Great American Middle Class and the restoration of the Gilded Age on the back of crony capitalism on a massive scale.

I was first old enough to vote in time to cast a vote for Carter (AFAIR, I did not vote in the primary) in his defeat at the hand of Ronnie Raygun. So the radical reactionary movement is the political movement that has been the primary malevolent force my entire adult life. I had no idea about CO2 and climate chaos in the early 80's, but had learned of the ecological overstretch of our industrial technological base in the 70's, so I already understood the economic policy stance pursued by Ronnie for the long term social suicide that it is.

But what now?

Clearly, if the latest edition of the Reagan Coalition could muster the turnout to defeat an African-America candidate, its a spent force.

So what now?

Time has not stood still while we were trapped for three decades in one side advancing and the other side fighting against wish fulfillment fantasies about the economy being a magical source of eternal growth in standard of living if we only step back and let the private governments of corporations make all our decisions for us.

Time continued moving on.

And we have a generation of putatively Democratic politicians who have been fighting rear guard defensive actions their entire political life, and who do not know what it is to go on the offense.

What is our political aim to be, at least with respect to the economy? Well, first it has to be ecological sustainable. Second, it has to be socially sustainable. Third, it has to be biased in favor of peace rather than war.

That is the basis for the focus on a Brawny Recovery from the current economic downturn ... a recovery on the back of hard work and production of real, long term, economic wealth, with broad based income growth as the primary economic engine, and the Finance Sector restored to its proper position as a complement to the Productive Sector, rather than the ill-advised and ultimately disastrous system in which the Finance Sector is the master.

We can, of course, start doing it as soon as we can elect Congressmen willing to push it. $80b a year for six years to build a coast to coast and border to border electric national rail network to cut our petroleum imports by 10%, including long distance HVDC transmission corridors to connect grids in resource areas to grids in population centers. $50b a year for ten years to build the electric regional rail, light rail, and trolley bus systems we need to ensure that the majority of metropolitan populations are able to get around during the coming series of price shocks coming, and $10b a year for conventional and HSR passenger rail to ensure that the clusters of metropolitan areas are able to continue functioning during those same oil price shocks. $50b a year for commercial and resident improvement and retrofit for energy efficiency.

Basically an investment program of $250b annually until we get our economy back on the track after the Reagan Derailment.

And not just government spending on fundamental investment, either. Feed-in tariffs to ensure that the wind farms and wind turbine manufacturing capacity, and other renewable resource capabilities, are in fact invested in by the private sector. Access to finance for state and local governments to buy into the insurance against energy price shocks from owning a share of renewable energy harvesting equipment.

All complemented by a restoration of the right for all employees hired by fictitious persons representing organized capital to in turn organize as labor and enter into binding negotiations for employment contracts. This, after all, was the primary target of the radical reactionary coalition. After a recovery in which basically all productivity gains were directed to corporate profits and none was directed to employment income, we can say with certainty that they gained their primary goal.

And we can now see what an unmitigated disaster it has been to roll back the Pro-Middle Class Policies that created the Great American Middle Class. So we must restore that element of the post-WWII Economic Policy, even as we shift it to a 21st Century Energy Economy.

But, that is politically impossible!

The objection is that economic policies bold enough to prevent the United States from collapsing to "banana republic" status are politically impossible.

The answer is, yes, of course it is. Things that are worth doing are quite often politically impossible. It has been, at various times in our nation's history, politically impossible to abolish slavery, to regulate food and drug safety, to regulate the health and safety of work conditions, to mandate the right to organize labor, to offer a job guarantee in the face of widespread national unemployment, to give more than lip service to civil rights for African Americans, to regulate the dumping of poisons and other garbage into our soil, streams, and air.

Indeed, it was at one time politically impossible to roll back the Pro-Middle Class policy regime that was the foundation of Post-WWII economic prosperity, but the Reaganites figured out a way to make it possible.

If something is important enough, politically impossible means that it is necessary to build the movement to make it politically possible. In this case, a movement consisting of:
  • organized labor
  • green activists
  • family farmers
  • progressive patriots
  • trial attorneys
  • and as many more as required to make it add up

The big political events in constructing the coalition are the mid-term elections of 2010 and 2014. Because with the current bunch of hard right wing idealogues dominating the Republicans and combination of Hedge Fund Democrats and gutless whipped curs representing the Democrats, we are well and truly mired.

Tuesday, May 19, 2009

It Need Not Be a Calamity

Burning the Midnight Oil for Living Energy Independence

Betwixt and Between, I find myself. I observe the validity of D00m.P0rn shrill warnings about the future ... when seen as possible outcomes rather than when seen as certainties. Yet I also see the potential for better outcomes.

And with respect to the strategy of sitting on the sidelines, weighing the likelihood of one versus the other ... I'm against it. Simply the decision to sit on the sidelines makes the calamity more likely as a result. So I am for getting into the fray and trying to make the calamity less likely and the hopeful outcome more likely.

The Calamity Cavalcade

As far as potential calamities, we do not have to look far for those.

We are on track to have a higher concentration of CO2 in the atmosphere than at any other time in the Holocene. We are engaged in this experiments with absolutely no serious evidence to suggest that it is known to be safe. Indeed, those benefiting in the short term from the reckless experiment will even try to reverse the sane burden of proof and place it on those who do not approve of undertaking the reckless experiment.

The argument being, in essence, that if you are driving through a thick fog, then as long as you don't see any cars coming, its OK to speed.

And of course, before the peril of climate chaos came to our attention, there was already the risk of ecosystem collapse hanging over our head, as more and more populations on the planet rely on an industrial technology that is quite clearly ecologically unsustainable and therefore certain to collapse sooner or later, unless we restructure our technological base to approach sustainability faster than we approach ecosystem collapse.

And then of course, even before the risk of ecosystem collapse was widely understood, the threat of nuclear holocaust.

Flood, Nuclear fire followed by Nuclear Winter, Famine and Plague ... and all three involved in or certainly leading to War ... surely rather than Four Horsemen of the Apocolypse, there is a whole Cavalry Unit.

Against that backdrop, it may seem provincial to worry about a mere collapse of a single national economy from first world to banana republic status, but that is the specific calamity that I am focusing on here.

The Structural Import Dependency

When I was growing up and became old enough to notice such things, Brazil was the code-word to be used for runaway inflation. While it was responsible for an impressive amount of industrialization during the 40's and 50's, Brazil's import-substitution policy eventually ran into a structural flaw. That was, as Brazil moved into more and more complex manufactures, the capital intensity of the new industries kept rising. Which meant more and more funds required to buy the capital equipment, produced overseas.

And yet, more and more of the "import substitution" involved creation of new income to demand new consumption, rather than swapping existing imports for domestic products. So the current account benefit of the policy, in terms of imports actually saved, tended to shrink, and the current account cost of the policy, in terms of structural dependency on imports of productive equipment, tended to rise.

Then the first Oil Price Shock hit, and its current accounts got into serious trouble. Conventional exports of tropical commodities had their prices hammered by the various oil price shock recessions, while Brazil was hit by an unexpected rise in the price of oil.

The need to recycle the oil revenues meant that for a while Brazil could close the gap with borrowing. But over time, debt service from borrowing made the gap in the current account even worse, and as the Brazilian economic position looked less rosy, Brazil started to find it harder to attract capital inflows to balance the current account deficit.

So the exchange rate started dropping.

Now, what happens when you are in an economy with a structural dependency on imports, and your exchange rate starts dropping? You need the imports ... all manner of industries will shut down without an ability to import parts and materials ... so you have to throw more of your domestic money at the foreign exchange (FX) markets, so your exchange rate falls, so you have to throw even more of your domestic money at FX markets, and etc.

Meanwhile the costs of production are going up, so there is cost-push inflation. If you are also trying to maintain the legitimacy of government by maintaining demand in the face of falling real income ... that is a recipe for hyperinflation.

That's Brazil ... what does that have to do with the US?

OK, so that's the Current United States Option Number 1. The US, after a 30 year diversion from the industrial development policies we pursued from the 1790's to the 1970's, is heading in that direction, should the price of crude oil return to its pre-Panic of 2008{1} levels.

And if the global recover is strong enough, it will, of course. Supply of oil is like the figure to the right. A steep enough drop in demand will leave oil selling for the cost of production, and then push the price down further, as the oil that is more expensive to produce drops out of production. On the other hand, once we hit the amount of supply available in a given period of time, the price will just keep going up until potential buyers are squeezed out to match the amount of oil available.

On the other hand, its not just the structural dependency that leads to the runaway inflation. There's also the policy that is founded on refusing to face up to the structural dependency, pumping up demand even though it leads to a free fall of exchange rates in FX markets.

Indeed, an international consensus emerged among the high income countries as to what to do when a country is faced with that kind of position. In order to ensure the ability of the country to meet its foreign obligations, it must through its economy into an extended period of depressed economic activity. Then collapsing incomes will mean fewer imports, and willingness to work at near starvation wages and attract foreign direct investment.

The "Washington Consensus".

A bit more pleasant, of course, if you are propounding it in the air conditioned meeting rooms of a five star international hotel in the capital of the country that has to impose a depression on its economy as part of an "economic restructuring" ... than if you have to live through it as an ordinary citizen of that country.

So that's option 2. We work to ensure that the recession continues on as an extended depression. First, as the consumer of roughly a quarter of the world's crude oil, that in itself will have keep the price of crude oil down. And second, by depressing our incomes and depressing the domestic prices of our real resources, we reduce our imports across the board while making the US more attractive for capital inflows aiming to exploit our real resources for export.

There is the choice between the Devil and the Hard Place, or the Rocky Shore or the Stormy Strait.

But It Need Not Happen: Option Three

But we know what the holes in the US current accounts are. We don't make much of anything that other people want to buy except for armaments and, like a banana republic, natural resources. And for armaments, we are half the world demand, while for natural resources, we are a net importer when Energy resources are taken into account.

An economy like the US that cannot power itself without imports is in an even more exposed position than an economy like Brazil that cannot equip itself without imports. You can ration, defer or postpone investment in equipment for a period of time and still keep the economy ticking over. This is much harder with the energy required for residences and workplaces, for transport to work, for shipment of goods, and for harvest of food and other natural resources.

But ... well, we know this. We have known since the 1970's that we would become increasingly dependent under the Old Energy Economy. We have known since the 1970's that our four centuries of energy self-sufficiency since European Settlement of the eastern seaboard of North America would be coming to an end unless we made substantial changes.

And then our ruling elites collectively decided to pretend that social division of national product is a more fundamental question than the ability to continue producing it, and we descended into the last thirty years of the wealthy focusing in grabbing a bigger share of the pie, while assuming that the baking of the pie would magically take care of itself.

But ... still, the fundamental physical reality is still there. Option Three involves reconnecting to physical reality and leveraging enough of our strengths while eliminating enough of our weaknesses so that the risk of collapse does not become a certainty of collapse.

According to the rough estimates of the Global Footprint Network, we have twice the world average biocapacity per person. That means that we should aim for more than just Sustainable Energy Independence ... we should aim for Sustainable Energy Abundance, taking care of all of our own needs with renewable, sustainable energy and providing energy for a value added products made with a surplus.

Pursuing the narrower technical and broader technological capabilities to meet that goal also means producing the equipment to harvest that energy. And since, unlike armaments, the biocapacity of the rest of the world is many times the biocapacity of the US alone, that will be an ability to produce things that many countries in the rest of the world will wish to buy.

And, indeed, unlike the armaments industry, the equipment to harvest sustainable renewable energy is an export that enriches rather than impoverishes the country that is our customer. And selling exports that enrich rather than impoverish our trading partners is a more sustainable long term proposition in a commercial sense as well.

Of all the high income nations of the world, we have done the most to allow our real productive capacity to stagnate and then decline. That means that, yes, pursuing the SEA Strategy ... the Sustainable Energy Abundance Strategy ... will involve quite a bit of investment in productive capacity to produce the equipment to produce the equipment to harvest the energy.

Government must intervene to ensure the market for Sustainable Energy, and intervene to ensure that there is US capacity to sell into that market. The alternatives are hyperinflation or ongoing stagnation.

But ... if government does intervene in this way, we can steadily cut into our structural current account deficit. Indeed, in terms of our external accounts, the SEA Strategy is self-funding, since the extra imports from the extra demand will be compensated for by reducing our dependence on energy imports.


{1. This is before living memory, but now that we have returned to the boom and bust economic structure of the "Gilded Age", we may as well recall that the "Panic" that launched a period of "depressed activity" is name by the year that the financial crisis first hit, not by the duration of the period of depressed economic activity. Just as the depressed period of economic activity after the Panic of 1993 lasted from roughly 1993-1996, so too the depressed period of economic activity following the Panic of 2008 will last from the end of 2007 through early 2009 at the soonest, and possibly through to 2010 or 2011.}

Sunday, May 10, 2009

The Bad News and the Worse News on Unemployment.

Burning the Midnight Oil for a Brawny Recovery

From Docudharma

The April employment numbers are out. The Broad Based (U6) unemployment figures ... the best measure of the "total people available to take on more work" ... give, on the one hand, bad news, and on the other hand, worse news. This is, of course, treated as "good news", because the expectation was that it would be on the one hand worse news and on the other hand catastrophic news.

20089.0%8.9%9.1%9.2%9.7% 9.9%10.3%10.9%11.2%12.0%12.6%13.5%

... or in terms of changes in the unemployment rate.

2008-0.1%+0.2%+0.1%+0.5% +0.2%+0.4%+0.6%+0.3%+0.8%+0.6%+0.9%

The bad news is, of course broad based unemployment is still rising. The worse news is that it is more than halfway to the "depths of the Great Depression" benchmark of around 1 in 4 out of work.

Even more, the populace has been trained to accept as "normal" unemployment rates what would have been considered an economic emergency back in the 1960's.

What's the Broader Picture?

Now, this is not firm evidence that the recession is going to bottom out this month or next. Even if the May numbers showed a drop in broad unemployment, that would not be definite evidence that we have hit bottom ... and the April numbers could turn out to be nothing but the lull in an ongoing storm, if the May numbers are another increase of 0.8% or 0.9%.

So there is still tremendous uncertainty about the short term situation.

However, each month that passes increases the certainty about the need for a Brawny Recovery.

When the economy gets going, we cannot afford another recovery gimmicked on the back of dubious debt, like the 2001 to 2007 business cycle. Instead, it has to be a recovery built on the back of doing and making useful things and, even, making things that can be used to make useful things.

Otherwise, we are in for something quite like a "Medium Big Depression".

The fragility of our finance sector was a long term problem due to reckless decisions to remove government regulation of the finance sector, and banks in particular. A century of experience with an industrial monetary production economy taught that an unregulated financial finance sector leads to one financial crisis after another. A half century of experience after the 1930's taught that a well-regulated finance sector is remarkably resilient in the face of quite substantial challenges. And so, our elected officials, on the various payrolls of the various banks and other financial firms, picked "unregulated, thanks".

But it was no accident that the fragility was revealed last year ... we were in an oil price shock by 2007, finally passing the previous (inflation adjusted) peak crude oil price of around $80/barrel, and the surging to $140/barrel before financial and economic collapse slashed at demand.

"Useful" = Energy Efficiency and Domestic Renewable Energy Harvest

The Achilles Heel of our Economy is our exposure to the risk of an oil price shock.

And its our economy in particular that is exposed. While other large economies have had policies to reduce their exposure to oil price shocks, and have been actively pursuing new ones, we had policies to increase our exposure to oil price shocks. Policies like a 25% tariff on imported trucks compared to a 2.5% tariff on imported cars, bribing our auto makers to design trucks that pretended to be cars and then market the benefits of driving trucks that pretended to be cars to the American public.

So if global recovery comes, with it will come higher crude oil prices, and the economy most likely to get hit the hardest by those prices is the US economy.

For the medium term, we will need to "keep on stimulating" to keep a recovery going in the face of that headwind. And for the longer term, unless that stimulus is reducing our dependence on imported energy, it will simply be unsustainable.

There is no "prosperity, but never mind improved energy independence" option here.

We do have choices:
  • Seriously pursue substantially improved energy independence
  • Tolerate a lost decade or more as the US economy shifts from recession to stagnation to recession to stagnation
  • ... Or, the US$ loses its standing as a global reserve currency, exchange rates begin to fall, prices of imported commodities and manufactured goods that we are dependent upon begin to rise, fueling further falls in exchange rates, fueling further price increase ... in other words, the hyperinflationary spiral familiar in economic history from the Confederate States in the 1860's to Brazil in the 70's and Argentina in the early years of this decade.

The newspapers will be full of "green shoots" stories. Indeed, there will be places in the blogosphere where there will be an effort to promote "green shoots" stories "to support the Obama administration".

But green shoots in the real world are always a bit fragile. And if these metaphorical green shoots are hit with the frost of a succession of oil price shock recessions, or the wildfire of a hyper-inflationary breakdown of the US$, "green shoots" will end up being the same ironic joke as "prosperity is just around the corner".

Midnight Oil: (You Wouldn't) Read About It

The bosses want decisions, the workers need ambitions
There won't be no collisions when they move so slow
Nothing ever happens, nothing really matters
No one ever tells me so what am I to know

You wouldn't read about it, read about it
Just another incredible scene, there's no doubt about it