Diatribes of Jay

This is a blog of essays on public policy. It shuns ideology and applies facts, logic and math to economic, social and political problems. It has a subject-matter index, a list of recent posts, and permalinks at the ends of posts. Comments are moderated and may take time to appear. Note: Profile updated 4/7/12

26 February 2015

What is “Nazism”?

[For an update on Russian Nazism and Nemtsov’s murder, click here. For a second update on Putin’s devolution and the national-scale Russian-Nazi thug “Strelkov,” click here. For two British views on the effect of Nemtsov’s murder, click here. For a recent post on electric cars’ underappreciated advantages, including variable range and variable performance, click here. For a short post on what may become the iCar, click here.]

Pose the title’s question to one of the remaining members of the “Greatest Generation.” What answer will you get? There will be images of Adolf Hitler, “sieg heil!” (“Hail victory!”) salutes, Swastikas, goose-stepping storm troopers, brutal conquest, and the Holocaust. Amidst a swirl of terrible images, survivors of history’s most gruesome war will have no doubt in their minds what “Nazism” is.

But times change. If the truth be told, Nazism is no longer a German phenomenon. It’s anything but. Yet the word and the evil still exist.

Germans gave Nazism a memorable, two-syllable name. But they didn’t invent it. It was around for a long, long time before Adolf Hitler.

It was there when Rome annihilated Carthage. It was there when the Mongol “hordes” massacred whole Eurasian cities, leading no one alive. It was there when the Ottoman Empire’s Turks wrought near-genocide on defenseless Armenians. It was there in the Japanese rape of Nanking. This all happened before the Third Reich fell.

In Germany today, there’s not much Nazism left. Today’s Germans are the most sincerely repentant among all of history’s brutal conquerors. They’ve built memorials and monuments to their bestiality in the Holocaust. And they’ve passed laws making denying history a criminal offense. Dachau and its gas chambers are now a sombre museum.

But outside of Germany, Nazism is alive and well. It lives in the Islamic State, which cold-bloodedly murders others who do not share both Islam and its own bizarre, extremist ideology. It lives among the Russian troops and Russian partisans driving refugees west and east from Debaltseve and Donyetsk. It lives among freedom fighters struggling in Ukraine, some of whom are actual cultural and genetic descendants of Ukrainian partisans who once fought for Nazi Germany. It exists in the various European fringe parties that want to expel or marginalize helpless Muslim immigrants seeking a better life. It’s especially vibrant among those who believe that Muslims are somehow genetically inferior or culturally violent.

It lives in places as disparate as Robert Mugabe’s Zimbabwe and the American South and Northwest. It lives in the hearts of Hamas partisans in Gaza who urge killing Israeli children while they hide innocent Muslim children near their weapons caches. It lives in the minds of “Orthodox” Israelis who cheer destruction of Gazan people and homes but won’t serve in the Israeli army and see the suffering firsthand. It lives in the minds of American police who kill or injure unarmed people of color when they wouldn’t a white man because, deep down, they think people of color are categorically more dangerous or less worthy, or that no one important really cares about them. It lives in the minds of Yanks who—despite all evidence and humanity—insists that our President is not one of us and doesn’t love the country that gave him the chance to be President despite his much-oppressed race.

Sometimes we call these offshoots or regrowths “Neo-Nazis,” to distinguish them from the now-all-but-vanished German kind. Yet except for nationality and ethnicity, they are all the same.

Nazism is Nazism. It’s an extreme form of the tribalism that arose out of our species’ biological evolution, but which our social evolution must some day overcome if our species is to survive.

Although convenient shorthand, the two-syllable word “Nazi” is a misnomer. Once it was an acronym for “Nationalsozialistische Deutsche Arbeiterpartei,” or “National Socialist German Workers’ Party.” That was Hitler’s political party.

But the root words “socialist” and “workers” were and are misleading. There’s nothing “socialist” about Nazism. It took the great private German industrial combines (including Krupp and Bayer) as it found them and bent them to a tyrant’s ends. Germany remained firmly capitalist throughout the Third Reich—a corporate totalitarian state run by a clique of evil, uncultured men who had managed to capture the spirit of a resentful nation battered by a previous war, defeat, and the Allies’ misguided collective punishment.

Nor was the Nazi Party a workers’ party. Although it won its first national election fairly, it quickly morphed into a brutal totalitarian organ that captured and controlled German politics, finance, industry and media by force, threat of force, and terror. Then Nazi Germany fought history’s biggest, longest and most horrible ground war with the Soviet Union, which styled itself the “workers’ paradise.”

There have never been two more adamant mortal national enemies than corporate Nazi Germany and the “proletarians” from the Soviet “worker’s paradise” in World War II. So much for “socialism” and “workers.”

However much a misnomer it may have been, German Nazism was not just an atrocity. It was an unutterably tragic mistake.

At the dawn of the twentieth century, Germany had one of two most advanced societies on Earth (the other being Britain’s). Bach, Brahms and Beethoven reigned supreme in music, Göthe, Schiller and Heine in literature. Men like Bose, Euler, Gauss, Planck and Schödinger—not to mention Albert Einstein, a German Jew who thought and wrote in German—dominated math and physics.

Not only was Germany at the apex of the arts and sciences. Many in the West naïvely saw Nazi Germany as a savior from something even worse: Soviet Communism and its Terror. When Hitler’s armies began marching east, many ordinary Eastern Europeans at first fought for and with them, until then-Germany’s “master race” ideology trod them under foot. As I’ve outlined elsewhere, the Ukrainians (along with the Poles) were among the most deluded and betrayed of this kind.

Unfortunately, Germany’s Nazi leaders were a clique of psychopaths dominated by a deranged former corporal and house painter. Neither they nor their extreme-tribalist “master race” ideology were clever enough to take advantage of these “facts on the ground.”

But what might have happened if then-Germany’s best had ruled in their places? It’s interesting to speculate. Here’s one possible alternative history:

After its bloodless “Anschluss” (annexation) of Austria and nearly bloodless invasion of Czechoslovakia, Germany’s blitzkrieg quickly conquers Belgium, France and Luxembourg. Then Germany turns east, but not with further blitzkrieg. Instead, it tills the fertile soil for anti-Soviet action in Poland and Ukraine, with months of political and undercover action.

With this groundwork done, the conquest of Poland and Ukraine is quick and (compared to actual history) painless. Most Poles prefer efficient and fair German rule to domination by Soviet Russia. They fight with German troops or stay at home. Nearly all Ukrainians want to remove the Soviet pillager that had battered their country with coercion and starvation during the inter-bellum period.

Having learned the lessons of Napoleon and Tolstoy’s War and Peace, German leaders are smart enough to stop there. There is no German invasion of Russia, no Battle of Stalingrad, no Siege of Leningrad, no years-long scorched-earth war on the frozen plains of Russia. Stalin, relieved of the pressure of threatened invasion of his still-nascent nation from the West, turns to fortifying the Soviet Union’s new western frontier, and to Japan.

With Russia in the Pacific war early and for real, and Germany essentially out, Japan makes a truce and departs from China and Korea, if not from Malaysia and Singapore and a few conquered Pacific Islands. Germany sues for peace, offering freedom or substantial autonomy for Belgium, France and Luxembourg. Not having been goaded by countless atrocities, Britain and the other Allies heave a huge sigh of relief and make a deal. (After all, the map of Europe changed dramatically after the First World War, and nobody seemed to mind much.)

The result? Yet another new map of Europe, with post-war Germany at its heart, a bridge between East and West.

The result today? A much larger Germany, not the US or China, is the world’s number-one economy. Russia (or what remains of the Soviet Union) is far advanced socio-economically, having avoided the catastrophic losses of history’s most costly and terrible mechanized invasion. Nuclear energy has been developed (probably by Germany, from which the most important physicists came), but nuclear weapons are still only a theory. The total of wartime deaths worldwide was a bit over seven million, less than one seventh of the actual total and less than in World War I. The world is a happier, more prosperous, less fearful and more productive place.
Of course there are questions regarding this alternative history, as with any counterfactual scenario. If Germany had had better leaders than Hitler, would it have made war at all? Could there have been any other consequence to the Allies’ disastrous collective punishment of the loser Germany after World War I than—as actually happened—an explosion of German resentment and rage?

No alternative history can ever claim accuracy. There are too many variables. You never get to rerun the tape. But the mere plausibility of this much more pleasant outcome for our species reveals an essential truth. Nazism was neither a rational strategy for Germany nor an inevitable outcome of Germany’s postwar mistreatment by the World War I Allies (against which our own Woodrow Wilson advised). Nazis and Nazism betrayed Germany, not to mention human civilization and the human race.

Having given us all a memorable name for Nazism, Germans have expunged it from their home. But the rest of us have not. We Yanks have plenty in our midst. We even have a private propaganda organ of great power (Fox) that fosters Nazi-like ideology among us. The Russians, with their tribalist action in Eastern Ukraine, have a Nazism problem of their own.

Two thousand years ago, Jesus of Nazareth advised us against Nazism in the most memorable way possible. “Love thy neighbor as thyself,” he told us. “Love thy enemy.”

Jesus knew nothing about evolution. Nor did the people of his time. But in advising us to love each other and to cooperate, he advised us to cherish our species’ single greatest competitive and survival advantage. It’s not our brains, our warm-blooded bodies, or our opposable thumbs. It’s our ability to communicate, empathize, and cooperate, which vastly enhances all of our other abilities, including our limited intelligence.

In all its many forms, Nazism is the antithesis of cooperation and humanity. It says, in essence, “You are inferior and subhuman. (Or you are violent, an infidel, lazy, criminal, or useless.) I will kill you just because you are you. Or, if you don’t do what I want, I will stomp on your face.”

To the first variant of Nazism, there is no answer but violence. The second variant admits of non-violent resistance, like that of King, Gandhi and Mandela. But more often than not, the actual answer to any kind of Nazism is violence, rebellion, or terrorism.

The best approach, of course, is to stamp out Nazism before it grows strong, with understanding, inclusion and empathy. Only if we do that can we solve the worst problems facing our species and requiring our global cooperation, including climate change, nuclear proliferation, and oil’s rapidly approaching exhaustion.

The Germans have seen the light and have given us a memorable name for our species’ most fatal character flaw. But outside of Germany it lives on. Fighting, suppressing and destroying it everywhere are every human being’s job one.

Russian Nazism Growing Plain

Three earmarks of Nazism were unmistakable in Nazi Germany. The first was extreme tribalism, a form of extreme nationalism that excluded even fully-German Jews and eventually motivated the Holocaust. The second was annexation of neighbors, beginning peacefully but soon morphing into blitzkrieg. The third was liquidation of domestic opposition by murder and terror.

Now every one of these earmarks is appearing in Vladimir Putin’s Russia.

The tribalism is already there, in Putin’s “aggrieved Russians” excuse for territorial acquisition in what used to be Ukraine. It’s also there in his people, exemplified by a Russian’s mother’s “pride” in her son’s wounds, which he suffered fighting Kiev “because we are Russian.” The annexation is already there, in Crimea and maybe soon in the Donbass.

Now the third earmark has popped up: the murder of Boris Nemtsov on the Krelin’s doorstep in Moscow.

Nemtsov had twice been Deputy Prime Minister of Russia. He was a liberal thinker and anti-corruption crusader, with an independent mind and a populist bent. He rose to prominence under Boris Yeltsin and was highly popular in his Yaroslavl region.

At one time, Nemstov was a credible political rival to Putin. He had a fallout with Putin some years ago, and Putin has used every lever of his overwhelming power to undermine Nemtsov ever since. Most tellingly, Nemtsov was reportedly about to publish evidence of Russian troops’ presence in Eastern Ukraine. Now he is dead.

All this makes a question I posed two weeks ago infinitely more pointed. Have Russians become the new Nazis?

Is Crimea Russia’s Austria, annexed without a fight, as in Germany’s Anschluss? Is the Donbass Czechoslovakia, or maybe Poland, to be annexed with greater force but still short of general war? Is Vladimir Putin another Adolf Hitler, or another Josef Stalin, each of whom originally won power in fair elections and then consolidated it by violence and terror?

There are differences, to be sure. Today’s Russian nationalism is nowhere near as exclusive, extreme, brutal and terroristic as German Nazism at its height. The “conquest” of the Donbass is not as bloody and abrupt as Germany’s invasions of Czechoslovakia and Poland. At least not yet. And so far we have only one prominent, apparently political murder, plus a number of jailings of lesser figures, including the oligarch Khodorkovsky (now in exile) and the blogger Navalny (jailed sporadically but repeatedly on minor charges).

But creeping Nazism is still Nazism. Vladimir Putin is far cleverer and more subtle than Adolf Hitler. Maybe he is also much less violent.

But times have changed. There were no nuclear weapons when the man who named Nazism built the so-called Third Reich. Now there are, and Russia has—at very least—the second largest and most terrible stockpile of them. Under the cover of its nuclear umbrella, Russia’s modernized armed forces, run by an ex-spook with a Metternich complex, could make infinite trouble in Europe and the world.

Already Putin has shown his propensity. His policies and his arms have reduced Syria to rubble and are in the process of doing the same to Eastern Ukraine.

Even if the probability is not (yet) very high, the risk of Russia becoming this century’s Nazi Germany is by far the most menacing development of our new century. Next to that risk, Syria’s devastation, the imminent Greek default, North Korea, the Islamic State, and even a nuclear Iran pale into insignificance.

In the worst case, a nuclear Iran cold devastate the Middle East. But ever since its 1980s war with Iraq, Iran has been cautious and circumspect in its international relations. A Nazified Russia could be a serious threat not only to Europe, but to our entire species. And unlike Iran, Russia has very few people, let alone in power, who remember personally what war is like. Putin is not one of them.

We don’t yet know who really killed Nemtsov. It might have been Russian Mafia or an offended oligarch. It might have been a misguided act of Islamists. In the murky, secretive, Machiavellian nation that Putin has built, we may never know. Or we may find out, decades later, that Putin’s had his hand in, just as we now know that the Nazis themselves burned down the Reichstag, terminating Germany’s nascent democracy.

What we do know is that there is now a runaway authoritarian government in Moscow. Unlike every other major power today, including China, Russia has a single, solitary man at its helm. And, despite his deceptive shrugs, he’s a macho man.

Just as Mao was really China’s last emperor, Putin is now Russia’s latest tsar. His government is consolidating its power with jailings, political trials and now, perhaps, murder. It has behind it the world’s and history’s second most effective propaganda machine (after our Fox): Putin-controlled Russian TV.

Putin’s government is already behind two disastrous foreign military adventures, by proxy in Syria and directly in Eastern Ukraine. It won’t listen to its best international friend, Angela Merkel, who now confesses she can’t understand Putin.

Apart from economic sanctions, which so far have been ineffective, the Russian people and the world have come up with nothing to check Putin’s caprice. Under these circumstances, can another Cuban Missile Crisis be more than a few years away?

Our species got lucky that time. Two Russians joined an American and managed to stave off nuclear Armageddon. Do we want to try our luck a second time?

It is now becoming clear that Vladimir Putin, not IS or Kim, is the chief threat to global peace and security and our species’ long-term survival. Every civilized Russian, every civilized nation, and every civilized leader should now become devoted to a single cause: checking Vladimir Putin’s power and, eventually, slowly and peacefully, producing “regime change” in Russia.

Our and China’s differences are minuscule in comparison. Xi Jinping is also consolidating his power. But he’s only the leading hand on a seven-member committee. Unlike Russia, China has many checks and balances, nearly all of which are unwritten and unseen. So far, Xi’s power has been directed primarily at purging China’s rampant corruption; he has skillfully tamped down the Chinese nationalism that threatens war in Asia.

In contrast, Putin has reveled in and fostered nationalism and already has promoted two horrible wars. We should enlist China’s aid and cooperation in reining him in.

Update II (3/1/15): “Strelkov” Redux and Putin’s Flaws

It’s hard to gauge a national mood from abroad. And you have to discount foreign news for bias in our Yankee press, even beyond the private right-wing propaganda organ Fox. That said, the national mood in Russia today seems more dangerous than it has been since the Soviet Siege of Berlin and the Cuban Missile Crisis of 1962.

Exhibit A in evidence is the murder of Boris Nemtsov discussed above. Exhibit B is the current status of Igor Vsevolodovich Girkin, aka “Strelkov.” According to the Washington Post:
In the year since the conflict began in Ukraine, Russian society has mobilized around the concept of an existential clash with the West. Putin warned darkly of a “fifth column” of Western-oriented Russians, and Nemtsov was surely high on the list. State-run television constantly pushes the accusation that U.S.-backed fascists are perpetrating genocide in Ukraine. Igor Strelkov, a far-right nationalist with dreams of establishing a new Russian Empire, was for a time last year one of the most popular figures in the country when he led pro-Russian rebel forces in eastern Ukraine.
I have written a whole essay on the imperial-scale Russian-Nazi thug “Strelkov.” But there are only three things you need to know about him. First, his self-adopted surname is very close to “Shooter” in Russian. He thus defined himself by his weapons, recalling Mao’s cynical slogan, “Political power grows out of the barrel of a gun.”

Second, “Strelkov,” is a suspected war criminal. He was the self-proclaimed “Defense Minister” of the self-proclaimed “Donyetskii Republic,” the first Eastern Ukrainian Region to seek independence from Kiev and annexation by Russia a year ago. He was in charge of separatist-rebel forces in Donyetsk when Malaysian Airlines Flight 17 was shot down, killing nearly 300 innocent foreign fliers.

Finally, “Strelkov” is as Russian as Putin himself. His real name is Russian, not Ukrainian. His adopted nom de guerre is also Russian. If Western reports are to be trusted, he is a former FSB agent and a retired Russian intelligence colonel. After the downing of MH 17, he fled (or was extracted) back into Russia to a hero’s welcome.

There is still no publicly released proof of precisely how and by whom MH 17 was shot down. But if separatist forces did it, “Strelkov,” as their commander, is at very least criminally negligent, as I have analyzed. He should be in a prisoner’s dock, awaiting trial in the International Criminal Court. Instead, he is a Russian hero, protected by Putin’s patronage and Russia’s nuclear umbrella.

I am no idle Putin basher. In several essays on this blog, I have praised Putin’s intelligence and leadership of Russia. See, for example, 1 and 2.

Putin is largely responsible for Russia’s rapid, bloodless and mostly painless rejection of the fictional economic system once known as Soviet Communism. He has cooperated with the West in such things as fighting the Taliban and terrorists in the Af/Pak region. For a time, he appeared receptive to making private business a greater part of Russia’s economy and Russia a part of the global economy. If Putin, like our George Washington, had anointed a successor and stepped down after his first two terms as Russia’s duly-elected president, he would have remained in the first rank of our species’ great leaders.

Putin knows his native Russia well, perhaps better than any person on this planet. But he has little knowledge of or understanding of the world outside Russia. Consequently, he has little ability to predict the consequences of his and Russia’s actions there.

Let’s review the evidence. Putin did not foresee that his adamant support of Assad would turn Syria into a killing field of rubble, lead to the rise of the Islamic State, and threaten to engulf the entire Middle East. Neither he nor anyone else has a good plan to put the Islamic Humpty Dumpty back together again.

Putin did not foresee that continuing to support the tyrant Yanukovich, whom Putin himself despised, would result in Yanukovich’s overthrow. He still does not understand that the overthrow was not a CIA plot, but a natural popular reaction to a medievally posh tyrant, a puppet of Russia, in the twenty-first century.

Having grabbed Crimea bloodlessly and painlessly, Putin did not foresee that encouraging and fostering the separatist movement in Eastern Ukraine would cause a real civil war on Russia’s doorstep. He did not foresee the displacement of now over a million innocent civilians, both Ukrainian and Russian, and rising. Nor does he see that displacement’s similarity to the Serbian “ethnic cleansing” in Bosnia.

As that civil war intensified, Putin did not foresee how the West would react—not with misguided and futile military adventures—but with stringent economic sanctions. Nor did he foresee how damaging those sanctions would be to a Russia just getting back on its economic and industrial feet after 74 years of Soviet Communism, plus a generation more to make the transition to the market systems that the rest of the world, for better or for worse, lives by.

In short, insofar as Russia’s relationship with the rest of humanity is concerned, Putin’s remaining Russia’s supreme leader after his first two terms as president has been an unmitigated disaster. He once took a world-war battered and Cold-War spooked nation out of the isolation of Soviet Communism into a resemblance of the “normal country” that Boris Yeltsin dreamed of and appointed Putin to build. Now Putin is putting Russia right back into its self-imposed isolation cell.

So today we have a supreme irony. Modern Germany, which named (but did not invent) Nazism, and which has purged it well at home, is now taking serious hits to its own economy in order to keep Russia from turning to Nazism. And Russia, which (in its Soviet) guise, once fought Nazi Germany to the most disastrous Pyrrhic victory in human history, is now abandoning its most successful trading relationship and a younger Putin’s dream of a peaceful trading zone from the Atlantic to the Urals. Instead, Russia is turning to China, which, having long ago streaked past Russia in the development race, will suck Russia’s oil and gas dry, leaving Russians little or nothing but richer and more dangerous oligarchs.

This is the road that Putin the Prime Minister is marching down. Why?

The best explanation I can devise is reversion to type. Putin was trained as a spook and worked as a spook for decades. That experience formed his character and his world view. He sees the world as an intelligence chessboard, a game played by intelligent, powerful people like himself. Ordinary people and honest business mean nothing to him. He tried a few times to be a statesman but, apparently, was disappointed with the slow pace of his results.

Putin’s most fatal flaw is utter ignorance of what drives our species’ activity in the twenty-first century. It’s not nineteenth-century Metternichian international power plays. It’s something much simpler and much more basic to human nature: business, commerce and trade—a quest for wealth and prosperity thorough voluntary business deals.

China understands this point. That’s how it rose, in a mere 66 years, from an impoverished and powerless victim of both Western and Japanese colonialism to its rich and powerful status today. In about the same time, and in much the same way, Japan rose from a nineteenth century imperial and colonial power to become the world’s third largest national economy. Germany has followed a similar trajectory.

The other “tigers” of Asia—South Korea, Malaysia, Thailand, Vietnam, and tiny Singapore—are following in China’s and Japan’s footsteps. Having had a small taste of Nazism in the anti-Japanese riots in China and the reciprocal anti-Chinese fervor in Japan, Xi Jinping wants nothing to do with Nazism. So far at least, he has controlled his nation’s dangerous nationalism enough to avoid slowing China’s rise.

Stalin, born Josef Vissarionovich Djugashvili, a Georgian, became Russia’s “man of steel.” (“сталь” or “stal’” means “steel” in Russian.) He is still popular in Russia, as the leader during Soviet Russia’s disastrously Pyrrhic victory over German Nazis. But, as I have analyzed, this “man of steel’s” rule was disastrous for Russia. His ethnic cleansing by deportation displaced and impoverished tens of millions. His forced collectivization of agriculture starved millions, especially in Ukraine. His Terror and his gulags tortured and murdered hundreds of thousands, if not millions. Had Chekhov or Tolstoy lived to see them, they would have torn their eyes out in despair. They would have thought that Ivan the Terrible had come back to life.

Contrary to popular Russian belief, Stalin’s inept and oppressive pre-war and wartime rule only prolonged Soviet Russia’s suffering. His massacre of Polish officers allowed the German Nazi blitzkrieg to drive right up to Russia’s borders. His inept command of Soviet troops and second-guessing of his best general (Zhukov) nearly lost Moscow and the war for Russia. The coward himself was preparing to flee Moscow until his military commissars informed him that, if he did, the Russian Front would collapse.

We Yanks, too, have had our “Man of Steel.” Ours was fictional and immortal: a cartoon and animated character called “Superman,” occasionally played by real actors. He always fought for good, as only fictional characters can do.

Real men of steel like Stalin only bring their people misery. They are incarnations of Lord Acton’s warning that absolute power corrupts absolutely. A corollary is that power held too long—like Mao’s capricious rule in his dotage—can destroy all that a once-great leader built.

Putin, apparently, believes himself a new man of steel. He tolerates, if not encourages, adulation of a Russian-Nazi thug who calls himself “shooter.” So Putin has becoming, or is becoming, Russia’s Dubya. The longer he stays in power, the more he will bring Russia low, as Dubya did us. What saved us Yanks was not any presumed Yankee superiority or “exceptionalism,” but effective term limits.

What Russia needs now, and what the whole world would welcome, is a government run by honest business people, who can give Russians not just relief from poverty, but the prosperity their industry and long suffering deserve. Power and respect will follow prosperity, as they have for China. So Putin can best serve his country and humanity now by finding such leaders, anointing them as Yeltsin did him, and retiring.

British Views on the Fallout from Nemtsov’s Murder:

For videos of the views of former British Ambassador to Russia Andrew Wood, click here. For the views of Tim Ash, a British financial analyst with long experience in Russia, click here.

Ash reflects the view of most investors: that Russia and Ukraine simply aren’t that important on a global scale. After all, Russia’s GDP is comparable to Italy’s. In contrast, Ambassador Wood’s largely geopolitical take is both broader and more realistic. While he speaks with an ambassador’s caution and British understatement, he sees a real risk—but still only a risk—that Russia’s new tsarstvo will implode, turn internally violent, and/or become something very dangerous to both Russians and world order.


23 February 2015

Variable-Range and Variable-Performance Cars

[For the Apple angle on this post, click here.]

Why is the average car capable of driving between 250 and 450 miles without refueling? The average driver’s daily mileage is nowhere near that high.

Before Chevy approved its electric Volt for production, GM did a lot of market research. It found that the Volt’s rated electric-only range, about 40 miles, was enough for the daily commutes of a majority of American drivers.

Add a few miles for shopping and taking the kids to piano and swimming lessons, and most drivers might need a daily range of some 60 miles at most. For my own odd location—between Santa Fe and Albuquerque but closer to Santa Fe—I might need to be in a “sweep spot” in range, about 100 miles. That’s it.

So why do virtually all consumers buy and drive cars with from four to nine times the range they need?

There are two easy answers. First, in gasoline cars increasing range requires only a bigger gas tank, which adds negligibly to the capital cost of the car.

Second, people like having the security of extra range. They never know when they might take a long car trip. And a bigger range lets drivers go farther and longer before filling up.

So we have myriads of drivers running around day to day in cars, SUVs and light trucks with ranges that they need or use only a few times a year, if ever.

The engineering and efficiency of this practice make no sense. Carrying around unneeded gasoline as a routine matter increases the car’s weight and mass (inertia). It makes the car more sluggish, i.e., slower to accelerate. And it decreases gas mileage.

Does the extra gas give the car any better performance? No. Gasoline is gasoline. So any engineer with an eye to efficiency, let alone perfectionism, should tear his or her hair out at the very thought of big gas tanks and excessive range.

Drivers could get a little better performance and gas mileage simply by keeping their gas tanks only partly full—just enough for their daily needs, plus a 20% safety margin. For most drivers, that would mean keeping their tanks about one-quarter full.

So why don’t they? Well, fueling every day would be inconvenient and time-wasting. And because the energy-density of gasoline is high, they wouldn’t save that much in fuel cost anyway. What busy worker or home-maker wants to spend precious time and mental energy worrying, every day, about how full the gas tank is?

Enter electric cars. They are a whole new animal. They alter, dramatically, every one of the factors that got us to this inefficient place with gasoline-driven cars. Let’s analyze.

First, look at price. Bigger gas tanks add negligibly to the price of a gasoline car. Not so electric-cars’ batteries. In electric cars, the batteries are the single most expensive system, both to supply and to maintain. They are also the heaviest and most massive single system, by far.

What’s the difference between a Tesla Model S and a Nissan Leaf? Mostly range and performance. The minimum range of a Model S is about 265 miles, as compared to the Leaf’s 73. So the Tesla’s batteries have to have 265/73 = 3.63 times the capacity of the Leaf’s. If we assume that Nissan and its battery suppliers have roughly the same technology as Tesla, that means the Tesla’s batteries mass and cost over 3.5 times as much as the Leaf’s.

Let’s suppose the Leaf’s batteries cost $10,000. Then the Model S’ batteries would cost roughly 3.5 times as much, or $35,000—half the car’s sticker price. If Tesla dropped the mileage to 73 miles and used only the Leaf’s $10,000 batteries, you could have all the Model S’ elegance and high technology for $10,000 (the reduced price of the smaller batteries), plus $35,000 (the price of the rest of the car), for a total of $45,000. That’s still in luxury-car territory, but at least not in extreme luxury-car territory. (All these prices are before any federal or state subsidies for electric cars.)

Note that the battery-price difference, $35,000 - $10,000 = $25,000, is way more than the price of a larger gas tank.

Once you have a bigger battery, it doesn’t matter whether you fill it up all the way or only partly. Electrons don’t mass or weigh much. So you would save little or nothing, in performance or efficiency, by not “filling up.”

As for convenience, electric cars beat gasoline cars hands down. Consumers like long-range gasoline cars because they don’t like having to go to gas stations frequently, especially at night or in freezing weather. But suppose you could “gas up” in your own garage, every time you come home, as electric cars let you do. Then all you’d need is a spouse (or mother or father) kind enough to remind you gently, “Dear, did you plug the car in and close the garage door?”

What about the battery’s mass or weight? Remember Newton’s second law of motion, F = ma? The acceleration a of anything, including a car, under a force F is inversely proportional to its mass, m.

So as the mass of the battery increases, the acceleration for a given force decreases, and with it the car’s performance. Big batteries slow cars down. But if the battery’s peak current (which generates the force) is proportional to its mass, the rise in battery mass produces an increase in peak current and therefore performance, due to a bigger F.

These two effects don’t precisely cancel each other. The inertia-caused decrease in performance with increasing battery mass is inversely proportional to the mass of the whole car, which is bigger than the mass of the battery. But the change in peak current—and therefore the increase in force (and performance) that it causes—is directly proportional to the increase in battery mass alone. That increase is larger than the corresponding decrease in performance from the car’s increase in total mass because the mass of the battery alone is smaller.

So, perhaps non-intuitively, an electric car gains performance with increasing battery size, despite the increase in total mass and inertia and therefore a decrease in energy efficiency. This is the main reason why the Tesla Model S can go from zero to sixty miles per hour in 4.2 seconds, while the Leaf (or Volt) can’t.

If Tesla produced a 73-mile-range car, it could sell it for around $45,000. It might have better performance than the Leaf, but it would hardly match the Model S’ performance.

Something very like this is probably how Tesla plans to offer its low-priced “people’s sedan” some time in 2017. But the same strategy is much more versatile. Tesla could offer a range of cars having the Model S’ elegance and high technology, but with a wide range of mileages, performances and price tags, all using the same basic mechanical platform.

This analysis leads to a much more important conclusion. The nature of electric cars and the laws of physics suggest that there’s no need for permanently long-range electric cars, or for permanently high-performance ones, except for showoff drivers.

Remember Tesla’s online battery-swap video of a couple of years ago? There was Elon Musk, watching a Model S drive out on a specially-prepared stage. When the car reached stage center, a trap-door mechanism below the stage started popping the battery pack’s screws, lowering the presumably spent battery pack, and replacing it with a fully charged one.

As this was going on, a TV screen behind Musk and the Tesla showed a driver pulling up to a gas pump to fill up. The Tesla drove off the stage with a fully-charged replacement battery in 93 seconds, before the gas guzzler could fill up.

If you can replace a big, mostly-discharged battery with a fully-charged big one in 93 seconds, you can certainly replace the big one with a small one—or vice versa—in the same amount of time. All you need is batteries with enclosures and plugs of standardized size and shape. (Their mass or weight, and internal size, would of course vary with their range/performance.)

Want a cheap electric car? Buy the low-range one and charge it in your garage.

Want to go on a long electric trip? Drop by your neighborhood Tesla dealer or authorized service station and replace your small battery, temporarily, with a higher-capacity rented one, just for that trip.

Want to impress a pretty girl with head-snapping acceleration? Do the same. Then, after you’ve got her, switch back to a more moderate, lower-range, lower-performance and cheaper battery.

You pay for only the battery you use and for the time you use it. At other time, you’re not driving around with extra mass, wasting energy. And you can convert your car for the long trip, or into an impressive performance machine, in 93 seconds. A lot easier than swapping a gasoline engine, no?

Do you begin to see how important Tesla’s Nevada “Gigafactory” for batteries will be? It can make different sizes of batteries for different models/ranges of the same car. It can make batteries for quick battery swaps: no long waits required. It can let a single car platform have a range of mileages and performances. But Tesla’s batteries will go far beyond cars. The Gigagfactory can make batteries for smoothing the intermittency of solar and wind power, whether for individual off-grid homes or for utilities. It can make batteries for remote off-grid electronic and electrical installations, including cell-phone towers, microwave repeaters, radar stations and emergency warning systems.

How many months before the Gigafactory is running at full capacity? My guess is between nine and twenty-four. Remember, at 3 miles per kilowatt hour (the Leaf’s and Volt’s rated mileage), driving an electric car costs just 60% (at the nationwide average residential electrical rate for 2013) of what it costs to drive a 30 MPG car on gasoline, even at $2.10 a gallon. This saving comes regardless of any subsidies for electric cars; and it’s much smaller than your per-mile saving when you charge your car from your own solar array.

The iCar?

For over a week, Bloomberg.com has been posting “exclusive” stories about Apple’s plans to get into the car business. One recent story had a provocative headline: “Apple Wants to Start Producing Cars as Soon as 2020.”

Bloomberg.com proffers three kinds of evidence for these plans. The first is alleged “leaks” by secretive, anonymous sources. The second is accusations (and an upcoming lawsuit) over Apple allegedly “stealing” employees away from Tesla and from Waltham-Mass.-based battery maker A123 Systems LLC. The third bit of evidence is Apple’s huge cash hoard of $178 billion, which is currently increasing at about 10% per year, and pressure from shareholders to do something with it or give it to them.

As most Apple fans and shareholders know, Apple is as secretive about its new-product plans as any American public company. It’s almost as relentless in pursuing leaks and leakers as the President was in pursuing Edward Snowden. So it’s entirely possible, although not a sure thing, that these rare leaks are, to use a double negative, “not unauthorized.”

Why would Apple want to spill the beans? I can think of only two reasons: disinformation and planting a marker.

Apple may actually not be going into cars at all, but into high-tech, high-power batteries to make renewable energy non-intermittent and more usable. Such a foray would be entirely consistent with Apple’s recent investment of $850 million in solar energy.

Alternatively, Apple may be trying to scare away other new entrants from the electric-car business, or give them an incentive to sell out when the time is right. For reasons described in an old post, Apple is probably not at all scared of anyone from Detroit. The few good people there it can hire away, and the rest would only slow things down.

Long before its threatened bankruptcy and bailout, GM ignited the current-electric car craze by announcing the Volt. That was eight years ago. I gave GM kudos for that bit of innovation—the first real innovation in autos to come out of Detroit since Chrysler’s “hemi” cylinder head in the 1960s. Detroit had done a lot of prototyping and market testing, but it had missed small, fuel efficient cars, the Wankel engine and hyrbids.

In the end, all you really need to know about “innovation” in Detroit is that GM felt it could not make or sell the Volt without a gasoline engine. So no, if Apple is not spreading disinformation, any deliberate or tolerated leak is hardly aimed at keeping Detroit out of the market.

It could be aimed at Tesla—an attempt to dry up new investment. Or it could be aimed at keeping the nascent electric-car market a virtually duopoly, with savvy foreign suppliers like Nissan-Renault nibbling around the edges.

Assuming that Apple is aiming at cars, and not batteries, what are its prospects? Tesla already has proved that you don’t need many traditional mechanical engineers, let alone those from Detroit, to make a first-class car.

As it turned out, doing that was a lot easier than Detroiters taunted and than sleepy auto-industry analysts expected. The main reason is Detroit’s dirty little secret: it no longer makes much of the cars it sells itself. It designs the bodies and styles, does gross mechanical engineering on the chassis, suspension, and assembly, and then orders many of the most critical parts from suppliers. Things like bearings, brakes, hydraulic parts, and key parts of engines all come from firms other than car makers.

But that’s not all. As I’ve noted earlier, an electric car is a whole new animal. It doesn’t have, among other things: (1) any internal-combustion engine, (2) an ignition system, (3) an exhaust system, (4) an engine-cooling system (because electric motors don’t waste energy as heat), (5) a transmission (because electric motors provide constant torque throughout a wide range of RPM), (6) an afterburner or exhaust-purifying system (because electric cars produce no exhaust), or (7) a gas tank or fuel-injection system.

In other words, most of the complex Rube-Goldberg systems that the mechanical and combustion engineers in Detroit design or buy from suppliers won’t be in any cars that Apple makes. On the other hand, Apple’s cars will have several things that Detroit has rarely or never designed or made, including: (1) electric motors, (2) high-power, solid-state current controllers, (3) regenerative breaking systems (which recharge the battery smoothly when the car slows down or brakes), and (4) all the whiz-bang driver-oriented consumers electronics for which Apple is famous and for which Detroit has gotten uniformly abysmal reviews.

So if Apple is truly aiming at cars and not at batteries, its planting a marker makes perfect sense. It may be telling investors and foreign car makers, “don’t mess with us unless you’ve got $178 billion (and counting) to spend and have a track record of superb consumer-oriented innovation.” It may be telling talented engineers in Detroit to start thinking about relocating to a region with cities that work, far better weather, higher salaries, and opportunities that will knock their socks off. And it may be telling Tesla and Elon Musk to look to their laurels.

As I noted in an earlier post, even Musk can fail to grasp fully how much a new animal electric cars can be. The post just above explains one two possible reasons: variable range and variable performance. An earlier post explains some lesser, but still interesting, potential innovations.

Now that Detroit has survived, barely, let the real innovation and competition in personal transport begin!


18 February 2015

Money, money everywhere but not enough to spend

[For a 3/16/15 update on the so-called “wage-price spiral,” click here.]

Introduction: the enigma of deflation
Is money really demand?
Corporate hoarding
Individual hoarding
Geezer hoarding
The effects of price elasticity
Differential in/deflation

Introduction: the enigma of deflation

Why is virtually the entire developed world in or near a deflationary spiral? Why is much of the developing world not far behind?

Among major powers, Russia is a special case. It’s suffering inflation because it has not diversified its economy, provides poorly for consumers, courts economic ostracism with disastrous foreign military adventures (in Syria and Ukraine), and relies far too much on oil and gas for exports and to finance government operations. Some minor powers are also suffering mismanagement-induced inflation; they include Argentina and Venezuela. But outside these few outliers, deflation, not inflation, is the economic risk du jour.

Things were different early in the last century. The Weimar Hyperinflation in Germany and Austria helped spark the greatest economic depression in modern history. The Hyperinflation and the Great Depression that followed led to the rise of Hitler and history’s most terrible war.

Now, a bit less than a century later, the rampant inflation that once caused such human misery has turned into deflation, except in mismanaged nations.

What has caused this dramatic and relatively abrupt change? Isn’t that the most important economic question of our age? Does anyone have any satisfying answers yet? If so, I haven’t heard or read any.

It’s not as if there’s a global deficit of money and monetary equivalents. Beginning with its “quantitative easing” (QE) some years ago, our Yankee Fed has injected some $3 trillion of artificial money into our Yankee economy. Japan’s central bank has followed, and the Eurozone’s central bank is just now beginning the process.

Then there are financial derivatives. These complex financial instruments are just another form of “liquidity.” Despite all the efforts of global regulators and our feckless, bought-and-paid-for Congress, we still have outstanding derivatives in an aggregate face amount of well over half a trillion dollars. (Estimates vary, for despite all the efforts to impose transparency, a lot of this financial gambling is still private and secret.)

But quantitative easing and derivatives are pittances compared to national debt. Nearly every major economic power—and lots of minor ones—has incurred substantial government debt since the Crash of 2008. The borrowing has reached rarely precedented levels here at home, in Japan, and in large parts of Europe. Our Yankee national debt alone now amounts to some $18 trillion.

So the total new “liquidity” in the aftermath of the Crash of 2008 is probably north of twenty trillion dollars. A recent private bank report puts the total at $22.5 trillion. Either way, that’s real money!

The classical, if simplistic, explanation for inflation is too much money chasing too few goods and services. If that explanation were right, then the twenty-trillion-plus of new liquidity should be driving prices through the roof, both here at home and globally. But over the six years in which this new liquidity has been added, the needle of inflation hasn’t budged much.

In fact, it has retreated. Japan and Germany—the world’s third and fourth largest national economies—are facing a serious threat of deflation, as are the UK and much of the rest of Europe. In December, the entire Eurozone had 0.8% annualized inflation, excluding the effect of lower energy prices. That was well below the central bank’s target of 2%. As for us Yanks, the yearly average of our own Yankee inflation rate, averaged over the last six years, was less than 1.6%.

Is money really demand?

So what gives? When in doubt economically, go back to basics. The most basic law of economics—after “there’s no such thing as a free lunch”—is the law of supply and demand.

The blowhards on Fox—as well as myriads of inflation hawks—equate supply of money with demand for goods or services. If there’s more money or “liquidity” out there, they think, consumers and businesses will bid up the prices of goods and services, and all will get more expensive. For these consummately non-expert thinkers, money or liquidity equals demand. (I confess that I, too, have fallen into that simplistic way of thinking at times; simplicity is so attractive, even when it’s wrong.)

But is that so? What if that equation is just plain wrong? What if having money doesn’t necessarily mean bidding up the price of things? What if a lot of businesses that got free money at the Fed window used it to pay down debt, quarantine toxic assets, or simply hoard? What if a lot of affluent individuals are just sitting on their money, fondling their bank notes or bars of gold like Silas Marner?

Something like that is indeed what appears to have happened.

Corporate hoarding

The Great Bailouts of banks, car makers and others “too big to fail” weren’t exactly venture-capital investments! They were not designed to finance new risky ventures, buy new equipment, hire new employees, or build new plants.

Quite the contrary. Their primary purpose was to: (1) retire corporate debt threatening solvency or (2) unwind complex financial transactions which had a lot to do with gambling and swindling by big banks and little to do with real life, aka productive activity.

Most of the rest of the free money went to banks and other corporations whose management, having learned hard lessons from the Crash of 2008 and its aftermath, wanted to build big rainy-day funds cheaply. In other words, the Great Bailouts went mostly into storage, whether in toxic-asset quarantines, debt retirement, or safe investment jars.

If there was any real buying of goods or services, it was minimal on the goods side. The Obama 2009 stimulus package, as many have noted, was laughably too small. Not much of it went for buying goods, except for asphalt, cement and some road equipment. And anyway it happened six years ago.

The services side employed hordes of bankers, accountants, lawyers and other consultants to figure out what had happened, unwind the bad transactions, and later do or encourage some more, perhaps a bit less flagrantly bad. Hiring of ordinary people was minuscule; that had to await slow recovery of the real (non-financial) private sector, which just started to happen last year.

Individual hoarding

On the individual side, the free or cheap money was used for similar purposes, with somewhat reversed priorities. There was less debt retirement because individuals—unlike corporations and their management—had to learn the lessons of capitalism the hard way. Many had to lose their underwater homes and (in states with no anti-deficiency laws) suffer bankruptcy or years of painful debt repayment for nothing.

The much-belated and overvalued virtue of “austerity” was forced on individuals as banks and other corporations enjoyed unprecedented corporate welfare. So individual debtors had to work for years to repay debt and/or emerge from bankruptcy, just as Detroit will be doing for decades. These folks—and Detroit—weren’t spending much and probably won’t be for a while.

But there was also a lot of rainy-day provisioning. Prudent folk who could do so cut debt, cut spending, and built up rainy-day funds. Even California did, under Governor Jerry Brown’s belt-tightening “Zen.” As a result, comparatively little money went into any markets for real (i.e., non-financial) goods or services.

Geezer hoarding

These phenomena were particularly acute among seniors. In order to understand why, it helps to be a geezer in or near the Baby Boom and in comfortable retirement. If you are there, as I am, you can see three big reasons why you might not be at all eager to bid prices up by buying a lot of stuff.

First, your parents endured the Great Depression. They taught you to be frugal, to know value, and not to live beyond your means. If they also endured periods of economic hardship (even if only relative), they taught you to preserve capital and save for a rainy day. The Crash of 2008 reinforced these lessons big time.

So even if you now have money, the security that having it on hand gives you is far more important to you than anything the money can buy. By and large, you keep your money in the bank, or in cash-equivalent investments such as stock, bonds, mutual funds, and ETFs. (If you favor Rand Paul or follow Fox, you might even keep it in gold bars or under your mattress, along with your assualt weapon.)

So one big reason why inflation is low is that most or all the new liquidity that ended up in individuals’ hands went into investments, not out into markets for goods or services. To correlate this investment flow with the effect of corporate bailouts, just remember that individual consumers account for 70% of economic activity, at least in the US.

A second reason for low inflation is demographics. Unless you inherited money or are an Internet-boom CEO or celebrity able to “monetize” your fame, you’ve had to achieve financial comfort the old-fashioned way: by earning it. Usually earning it meant decades of effort.

So for most of us, increasing means come with increasing age. The old have more wealth than the young. And having been weaned on the lessons of the Great Depression, the old are not spendthrifts.

These trends will only become more pronounced as populations continue to age, due in part to increases in medical technology, better public health and healthier life styles. As national populations age, aging retirees will continue to create large and stable sinks of ready cash—a geriatric money pit.

Third, geezers don’t spend much because appetites and energy decline with age. As you get older, you just don’t eat, need or use as much as before. You don’t travel as much. Long trips are painful and boring, whether by car or plane, even if you drive a Tesla or fly first class.

There are only so many movies, concerts, operas and plays you can attend. Today, photographic-quality free broadcast TV with surround-sound makes watching at home or going out a tossup. Interest or capacity, if not sheer time, imposes limits. Not that many people spend their declining years collecting things: conspicuous consumption is for the striving 1% banker in his prime, not the average geezer.

These three factors—a lust for security rather than luxury, aging populations, and consequently declining appetites—decouple age-related wealth from spending. Retirement savings, by and large, don’t chase goods and services and raise their prices. Geezers sop up the pool of age-coupled wealth and keep it in jars, leaving little liquidity to flood markets for real things.

Investments are another story entirely. They are the jars.

The global explosion of retirees and their wealth has created an unprecedented, global boom in financial investments and markets of all sorts. Many of these investments feed on others of their ilk: mutual funds of stocks, funds of funds, index funds, and long- and short-term options on all of the above. This boom in investment alternatives is likely to continue, perhaps with occasional busts, at least until the Baby Boomer pig has moved through the demographic snake.

The effects of price elasticity

Yet another factor decouples theoretically available liquidity from inflation. Roughly speaking, it’s the distinction between necessities and luxuries. If there’s a flood of money sloshing around and food gets scarce, the price of food will go up. Why? Because everyone needs food, even retired geezers living on their income. So all bid up the price.

But what if only arugula gets scarce? How far can its price rise?

How many people eat it to begin with? Of those, how many will pay more for arugula than for, say, spring mix or iceberg lettuce? How many will pay a lot more? Probably not many.

If you want to correlate gross, undifferentiated increases in the money supply with increases in the prices of goods or services, you have to consider the price elasticity of demand (and supply) of each good or service. Inelastic prices will rise—the higher the more they reflect true necessities and have fewer substitutes. Elastic prices will rise less or not at all.

That’s why housing prices are still going up, although not yet (in many places) above their pre-Crash bubble levels. Everyone needs a place to live. Even geezers want to help their kids and grandkids find housing, or at least get the Millennials out of their children’s homes and on the road to independence. And there’s no substitute for living in the best neighborhood or (for families) the neighborhood with the best schools.

So housing prices are relatively inelastic. They continue to advance, especially in more desirable areas. That’s why there have been successive and recent housing bubbles in places as diverse as the US, Ireland, Spain, China, Hong Kong, Tokyo, London and Sydney.

But food? Not so much, at least in developed nations. There, epidemics of obesity attest to surfeit. You can eat only so many hot dogs, whether in an hour-long contest of gluttony or in a week, month or year. Just walk into any supermarket, anywhere in the OECD, and you will see that there’s not much you can buy to eat these days that doesn’t have reasonable substitutes. Had anyone ever seen a fat Chinese or Japanese much before this new century?

Food is a necessity generally. But in OECD nations there are very few specific items in that category that are necessities, let alone ones that don’t have good substitutes. Therefore the prices of most food items, as distinguished from food in general, are elastic. Their prices go down as demand goes down, and demand does go down as populations stop growing and age.

What of the poor and malnourished, you ask? Well, they may have inelastic demand in theory, but they don’t have much money. Just give them a raise—as with a higher minimum wage—and you might start to see some inflation in basic foodstuffs. But if the poor are barely scraping by, and if the rest of the developed world has too much food and too many choices, inflation in food prices is unlikely, barring crop failure or other agricultural disaster.

Differential in/deflation

The more you think about it in this nuanced way, the more it becomes clear that general inflation is likely a thing of the past, at least in any developed nation in which population growth continues to decelerate, demographic aging continues, and people continue to acquire more wealth as they age and put it in jars. Inflation will spike only in limited, specific markets for goods and services that are necessities (or are perceived as such) for a particular demographic that is increasing in numbers and/or wealth.

Thus, for example, our aging population, coupled with the concentration of wealth with age, helps drive inflation in health-care products and services. Continuing population increases will also drive inflation in residential real property and, indirectly, commercial property, especially consumer-oriented commercial property. At least this will be so in the more desirable property markets in wealthier and more politically stable places. Yet food will continue to enjoy modest or small increases in price in developed nations, as long as they keep their populations under control and there are no systemic disasters in agriculture (such as a newly mutated blights or diseases affecting crops or food animals).

Energy will have a particularly interesting future. At the moment, large fractions of our species still have achieved nowhere near the level of energy use of OECD citizens. As the vast masses of global citizenry slowly rise toward that level, global demand for energy may jump by as much as five times. What then will happen to prices?

The answer depends on the source of energy. Oil has a global market and (at the moment) few substitutes, although electricity and natural gas are rising in use for transportation. So oil’s price, and the prices of its derivatives (gasoline, diesel, jet fuel, and heating oil) could skyrocket.

Ditto for coal if every nation continues to use it. But OECD countries are now on a course of phasing coal out for less polluting and less expensive alternatives that have less disastrous effects in accelerating global warming. If these trends continue, coal could perhaps get cheaper for the few poor nations that continue to use it, incidentally encouraging them to continue accelerating global warming.

For natural gas (at least for now) and for renewables like solar, wind, and hydroelectric energy, the outlook is quite different. These sources of energy have no global market yet. Renewables, in particular, are resourced and used only locally or regionally.

Each of these sources has the potential for a global market. Natural-gas is closest, with a few liquified natural gas (LNG) tankers and terminals available now and more on the drawing boards. If hydrogen from electrolyzing water can be made cheaply enough—and transported in liquified or compressed form cheaply enough—renewable energy, too, might evolve into global markets, in the form of trans-shipped hydrogen.

But until these or other similar hard-to-predict events occur, natural gas and renewable energy will continue to enjoy the opposite price-inflationary effects of oil and coal. As long as any OECD country (or indeed and developing country) keeps its markets for these energy sources local and its population growth under control, and as long as it works at energy conservation and greater efficiency of energy use, local prices for these local forms of energy, decoupled from global markets, should fall as demand stabilizes or even decreases, and as supply expands. The great global mass of poor consumers moving through the development snake should affect the local markets for these local energy sources little, or not at all.

So except for a few things like real property (in desirable markets), oil, and health care, deflation is the new big risk. It looks as if it will remain so for the foreseeable future, as global population growth decreases, populations age, and our species begins to come to grips with Malthusian realities. Deflation might actually get worse as global economic activity falls with decelerating population growth, aging populations, and more modest and conservative devloped-nation lifestyles with more electronic “travel” and less profligate use of fossil fuels.

In this environment, a single figure for general inflation (or deflation) will be of limited use as an economic gauge. All it can tell us is whether central bankers worldwide are doing something very wrong. It’s at best a “panic stop” or “blast ahead” indicator. It will be of little use to professional economists like Janet Yellen.

To track inflation or deflation meaningfully, let alone to predict anything useful, we are going to have to follow it on an industry-by-industry or sector-by-sector basis. Just as in medicine we no longer judge a patient’s health by body temperature alone, the days of judging the health of an entire economy by glancing at a single figure for general inflation are over.

So, my fellow geezers, should we all put more money in our little jars?

Update 3/16/15: is the “wage-price spiral” dead?

The notion that government can cause inflation merely by printing money, discussed above, is not the only simplistic theory on the origin of inflation. Nor is the underlying fallacy that money equals demand the only flaw in logic. Another simplistic theory of inflation is the so-called “wage-price spiral.”

People who lived through the Nixon-era inflation of the early 1970s are familiar with the theory. It goes like this:
“When unemployment gets too low—a desirable social condition!—employers bid up wages in an effort to attract new employees and retain old ones. Since most private employers are not eleemosynary institutions, they raise the prices of their products and services to compensate for the higher wages they must pay. If all employers act the same way, increasing wages just barely keep pace with increasing prices, and inflation accelerates, leaving retirees and other fixed-income folk in the lurch.”
It takes only a moment’s thought to see some holes in this logic. First, it paints with far too broad a brush. There are thousands of jobs in our diverse nation, in dozens of sectors. Surely employment and wages in all of them don’t follow exactly the same trends.

For example, right now unemployment is increasing in two important sectors of our economy: the oil patch (due to low oil prices) and finance (due to the continuing aftermath of the Crash and an acceleration in automation). As it turns out, these sectors enjoy particularly high salaries. So if employment in them is decreasing, while employment in relatively lower-paid professions such as nursing and retail sales is increasing, isn’t the result at most a wash, insofar as the average consumer’s market-basket expenses are concerned? As in the case of the money-equals-demand fallacy, don’t economists have to look at things more granularly, at least sector by sector?

Second, demographics may skew the supply of labor, especially at the high-earner end of the wage spectrum. By and large, older people earn more money. But the Baby Boomers have just begun to retire. As the head of the Baby Boomer pig (pun intended) moves into the retirement snake’s maw, there is still a big body of population bulge—excess labor supply, if you will—waiting to leave the field, whose transition out of the labor market at the high end may drive average wages down. Only when the demographically smaller next generation (Generation X) reaches its peak earning years might a real upper-income labor-supply crunch come. We’re decades away from that place now.

Finally, under current conditions there may be a mis-application of the theory, even if it’s basically sound. Economists start to worry about inflation, we are told, when the official unemployment rate gets down near 5%. But we all know that the “official” unemployment rate does’t reflect real unemployment. It doesn’t, for example, include people who’ve dropped out of the labor force (whether or not temporarily) or people who have part-time work and want full-time work. Informal, “unofficial” estimates put total unemployment, including these workers, in the teens in percent—far from any inflation threat under conventional wisdom.

In fact, economists are puzzled now because inflation in most states does’t seem to be following the conventional wisdom. Wages and salaries aren’t rising in most states although unemployment is down near 5%.

Some economists worry that inflation is a lagging indicator, so it may be hiding, ready to leap. There may be some truth in that. Janet Yellen must be ever on alert.

But don’t scientists, who include (or should include) economists, fit their theory to the facts, rather than vice versa? Isn’t it possible that a theory from the 1970s, for a society with entirely different economic sectors, job categories and demographics, is inappropriate for today’s information economy with the Baby Boomers at their peak earning years? Could anomalously high inflation and low unemployment in North Dakota and Texas simply reflect the importance of the shale-oil economy there, the high salaries available to young roustabouts, and the fact that low oil prices haven’t quite yet either (1) cratered jobs or (2) been reflected in official statistics? After all, don’t government statistics, too, lag reality?

Doesn’t Apple’s status as the world’s most valuable company, not to mention its coming induction into the Dow 30, tell us that something significant might have changed?

If these musings are right, then maybe conventional economic wisdom from forty years ago is, to use Obamanian understatement, “inaccurate.” Maybe we are seeing a new secular trend, or “new normal,” based on massive changes in our workforce structure, the passing of the huge Baby-Boomer demographic bulge through its peak earning years, and retiring and retired Boomers’ tendency to hoard cash in passive investments rather than spend it.


10 February 2015

Stopping Putin

Have Russians become the new Nazis?

The very question resounds with irony. In their Soviet guise, Russians were by far the worst victims of Nazi German aggression. They lost one in seven of their entire population. The Siege of Leningrad alone was the greatest wartime catastrophe to befall any city since ancient Rome’s annihilation of Carthage.

And yes, it is true, not propaganda, that neo-Nazi Ukrainian death squads have been active in Odessa and Eastern Ukraine. People with clear and well-documented neo-Nazi tendencies hold high positions in Ukraine.

But what was the essence of German Nazism? Extreme tribalism, pure and simple. Nazis supposed German “Aryans” to be the “master race.” All others, especially Jews, were subhuman, to be used as slaves for Aryans’ pleasure or benefit, or disposed of at will, often in the most brutal ways imaginable.

Today something similar is happening to ethnic Ukrainians from Eastern Ukraine. Some 490,000 of them have reportedly been displaced westward. Meanwhile, some 430,000 civilians of Russian descent have fled eastward, into Mother Russia. What’s left in Donyestsk and Luhansk—-and perhaps soon in Debaltseve—are the most hardened, virulent Russian partisans, Russian spooks, undercover Russian troops, and remaining ordinary people too old, weak or poor to flee.

This is ethnic cleansing, pure and simple. Its goals are as obvious as they are inhumane: to create a new “reality on the ground,” in which ethnic Russian partisans in the separatist parts of Eastern Ukraine constitute an artificial majority, who can then secede from Kiev and join Russia.

Now that most ethnic Ukrainians have fled, Russians could “win” even an honest plebiscite and secede, at least in the so-called “separatist areas.” Then the fate of Crimea will follow as night follows day.

But there’s a vital difference. Putin “took” Crimea, which was already a Russian-majority region, without a drop of blood shed. If it goes, Eastern Ukraine will go with unspeakable blood, death, displacement, exile and suffering.

Isn’t this Bosnia redux? A Russian mother professes pride that her son was wounded fighting Kiev’s forces. Why, a reporters asks. “Because we are Russian,” she answers.

Tribalism, pure and simple. In the twenty-first century. In the Nuclear Age. On the part of one of only two nations with world-destroying arsenals of nuclear weapons.

Many enigmas surround Vladimir Vladimirovich Putin. But one thing is now absolutely clear. He does not give a damn about ordinary people.

For him, they are pawns on a chessboard. Their loves, families, blood, flight, suffering and death mean nothing to him. In this respect, Putin has become Stalin redux: “A single death is a tragedy; a million deaths are a statistic.”

Syria’s abysmal condition should have been ample proof of this point. Without Russia’s staunch financial and military support, Bashar Al-Assad could never have turned that once-thriving nation into a barren killing field salted with rubble, now a playground for the most brutal Islamic extremists.

But Syria was and is muddled. It’s not clear how much of the extreme tribalism came from Russia and how much from the Ayatollah’s tribal Shiite Iran, the Alawite-Sunni divide in Syria itself, or the millennial Sunni-Shiite schism. It’s also unclear whether moderation on Assad’s part, or “regime change” by Russia toward a more moderate leader, could have avoided the rise of IS. Perhaps Russian tribalism took a back seat to Shiite tribalism and a legitimate fear of Sunni terrorism.

Yet in Ukraine there is no doubt. Russian tribalism is the primary motivator of the increasingly dirty and brutal war. Putin himself has repeatedly denounced the Soviet Union’s dissolution as if it had been the old Russian Empire, which, in a sense, it was. His actions and his words both point to a “reconstruction” process, with ethnic Russians in charge.

Ethnic cleansing and territorial conquest are anathema in our new century. Or at least they should be.

So Putin must be stopped. But how?

To say this is a difficult problem requiring cleverness and finesse would be Obamanian understatement. Chancellor Merkel is right: giving Kiev advanced weapons might only escalate the conflict.

Uncontrolled escalation would be disastrous. When Putin warned and joked that his troops could be in Kiev in two weeks, he was probably just reporting the advice of his own military intelligence. And that intelligence was probably about right.

Lest we Yanks be tempted by John McCain’s and Lindsey Graham’s puerile fantasies of Yankee omnipotence, we ought to recall our own experience in Gulf I, our most successful major conflict since World War II. There our buildup of forces in peaceful, secure Saudi Arabia took five months. By that time, all of Ukraine could be thoroughly occupied and locked down, a new Russian province.

So fantasies of direct Yankee or NATO intervention or east-versus-west Armageddon are just that: fantasies. No rational person wants to go down that road, even without the nuclear risk.

But could accurate weapons, judiciously applied, slow down the ethnic cleansing, retard the Russian and Russian-partisan onslaught in Eastern Ukraine, and push the culprits to the bargaining table? We won’t know unless and until we try.

Any effort to supply arms must observe four conditions with absolutely fidelity. First, the weapons must be accurate in the sense discussed in two previous essays (1 and 2). Second, they must be used for defensive purposes only: against tanks and planes making incursions into Ukrainian-held or neutral territory or attacking civilians.

Third—and this is most important—all advanced weapons must at all times be under the strict control of elite, disciplined troops commanded in real time by civilian leadership in Kiev. None of these weapons can, under any circumstances, fall into the hands of neo-Nazi units or former Svoboda partisans. Kiev, NATO and weapons suppliers must make absolutely extraordinary effort to insure that these conditions are met.

A year ago, Kiev had no Ukrainian-loyal military force at all, let alone an elite one. So how could this be done? Most probably, the elite forces would have to come from a neighbor, perhaps Poland.

Finally, these weapons and the elite forces that handle them must remain, in real time, under the strategic command of friendly foreign forces with geopolitics in mind. The forces handling them should be and remain peacemakers, not partisans. As for language, Polish and Ukrainian are both Slavic tongues; like Spanish and Portuguese, they are close enough that Polish and Ukrainian troops could communicate with some difficulty.

However well commanded and well disciplined, any supply of accurate weapons and elite troops to handle them can mount nothing more than a holding action. The real action is and will remain where it always has been: in politics, including sanctions.

Russians are good people. They have suffered more in history, including recent history, than any other major power’s people. They emerged from serfdom—a form of slavery—more recently than any other major power’s people. They are now in the grip of the world’s second most clever, subtle and effective propaganda machine, after our own Fox.

The Russian people need to see, know and understand what is happening in Eastern Ukraine, in their name. When and if they do, there will be a political solution, and this ugly war will end.

When the Soviets withdrew from their conquest and occupation of Afghanistan, a little-known force was partly responsible: Russian mothers. In the midst of Soviet oppression, they mounted an unprecedented (and, in the West, little known) letter-writing campaign. Of course accurate weapons, which shot down Soviet planes and helicopters, helped turn the tide of battle. But it was Russians’ own innate disgust at war—as the world’s most recently battered people—that caused the reversal in policy. That same disgust might have the same result in Ukraine, if only the Russians had accurate news.

When I was in Moscow on a Fulbright Fellowship in 1993, I listened incessantly to Russian-language radio, in order to improve my language skills. As I did, I noticed something extraordinary. The best Russian-language news programs on the air—by far—came from the Voice of America and Radio Free Europe.

These Yankee-financed programs excelled in every possible way. Their signals were strongest and clearest. Their audio was most distinct. (In one Russian-broadcast program, one of three interviewees was so far from the microphone that radio listeners could hardly hear his voice.) The format and content of their programming, including music and entertainment, were most interesting and varied.

Most important of all, these stations were devoid of propaganda. The news they offered was straight and true: mere facts, with little or no analysis. The programs’ producers were smart enough to know that Russians, who had been bombarded with propaganda for over seven decades, could spot it a mile away. No one who works at Fox could ever have held a job at Voice of America or Radio Free Europe. (For a recent post on why, click here.)

Putin and some Russians lament the Soviet Union’s fall and dissolution. But empires rise and fall. Putin can no more re-create the Soviet Union than Churchill could re-conquer India after it won its independence.

Nor should he or any civilized Russian want to. If we can make that fact clear to Russians, without threats or propaganda, this crisis will slowly fade away.

Our own big Yankee mistake was to think we “won” the Cold War. No one won it. It was an unmitigated disaster for both sides. (1, 2, 3, and 4)

Perhaps our biggest Yankee mistake was to disband Voice of America and Radio Free Europe, believing they were no longer necessary. There was nothing like them on Moscow’s airways in 1993. Perhaps there is still nothing like them today.

Straight, accurate news is always necessary. It is never more necessary than today, when rising Russian nationalism fed by Putin’s propaganda machine competes with rising Yankee insanity fed by a rogue private propaganda machine called Fox. If anything can bring back the threat of mutual nuclear annihilation that we and the Russians narrowly avoided in October 1962, it is a global clash of nationalistic propaganda. People fed with lies can do insane things; witness Nazi Germany.

So what will get us out of this crisis is neither rashness nor appeasement. Only professionalism will. We need elite, professionals soldiers who, with absolute discipline, can stop the Russian/partisan putsch in Eastern Ukraine without creating yet more refugees or fanning the flames of general escalation. Ukrainian neo-Nazis and former Svoboda partisans need not apply.

We need professional news reporters that can let the Russian people see the suffering that Putin is causing in their name, and how it might affect them and their national legacy. Neither Putin’s state-controlled TV nor our Fox propaganda machine need apply.

We need professional diplomats who will tighten sanctions as needed, but judiciously and wisely, and release them quickly, but only at the right time. “Hit ‘em hard, now!” partisans like McCain and Graham need not apply.

The Allies applied harsh “sanctions” (aka collective punishment) to the loser, Germany, after World War I. What were the results? The Weimar Hyperinflation, the rise of Adolf Hitler, the Holocaust, and fifty million people prematurely dead in war. The Germany of Göthe, Schiller, Brahms and Beethoven morphed, albeit briefly, into the Nazi Empire. We don’t want the same thing to happen to the Russians. We have to be ever conscious of cause and effect.

The Russian people must know and understand that global economic ostracism is not going to make them wealthier, healthier, happier or more respected. But they must not feel so oppressed and isolated that they turn on the rest of the world and entrench a deeply flawed leader. Wasn’t that just what happened with Stalin?

To the extent possible, we should target sanctions at Russia’s defense industry, media sector (aka organs of propaganda), financial sector, energy sector, and pro-Putin oligarchs, while keeping channels of “innocent” commerce as open as possible. Wouldn’t it be great if our banks could provide venture capital to young Russian entrepreneurs while strangling the businesses that foment, support and profit from suffering in the Ukraine?

What we need most of all is not panic or blind fierceness. We need consummate professionalism. We need weapons that are defensive and accurate. We need soldiers with absolute discipline and self-restraint to use them. We need reporters with absolute fidelity to truth to show Russians what Putin is doing in their name and gain their trust. And we need financiers and diplomats with great finesse and delicacy to apply sanctions as needed, release them when the time is right, and bear no grudges. The stakes are far too high for that.


06 February 2015

Vive Paris!

[For an update of 2/16/15, click here.]

[The recent post on accurate and realistic cost accounting for solar photovoltaic energy is one of the most important ever on this blog. But it’s time to move on, with only a backward link-look. There will be more posts on energy in the near future, in recognition of the vast changes that our species must make in its energy infrastructure, as oil runs out globally, in order for human civilization to survive in anything like its present form. In the meantime, it’s good to pour some disinfectant on the rotting and stinking slime-mold that is Fox.

Paris is suing Fox. No, not the infamous celebrity; the French capital. Why? Because Fox, in its customary disregard for truth and decency, maligned the venerable French city.

Fox accused it of bending over backwards to appease militant Muslims by, among other things, setting up official “no go” zones in its suburbs, which were out of bounds for non-Muslims. Fox made this bizarre claim in the immediate aftermath of the Charlie Hebdo massacre, when all the civilized world stood as one with Paris. But not Fox.

Like much of what passes for “news” on Fox, the calumny was and is false and misleading. So now Paris is going to call Fox out in an eminently civilized way: a lawsuit for libel and defamation.

The thrust of Fox’ lie was its customary appeal to the worst in us Yanks, our mindless chest-beating. We Yanks, it implied, know how to keep Islamic extremists in their place. The “wimpy” French, with their “European socialism” and unpopular president, do not.

In fact, it’s much the other way around. Our Yankee First Amendment guarantees everyone religious freedom. So we let Muslims (or anyone else) wear what they want, especially if their religion demands it.

This is one of the few instances in which we Yanks surpass the French in liberty. We allow Islamic head scarves in schools and workplaces. France does not. We allow them unless there’s a convincing practical reason—not a political, cultural or religious one—not to. For example, workplaces here can forbid head scarves where they might get caught in rotating machinery and cause injury.

In the long sweep of history, Paris’ lawsuit is far more important than the controversy about the phone and e-mail hacking perpetrated by Antichrist Rupert’s other noxious rags in England. This suit will address whether a sensational lie, labeled as “news,” can tarnish a whole society and distort our views of a central issue of our age: how human civilization can embrace its Islamic faction, and vice versa. And it will do so in the context of Fox’ decades-long slander of France and Europe as weak, “socialist” and decadent.

At first glance, the legal standard for the suit is a tough one. Under a half-century-old Supreme-Court decision (New York Times Co. v. Sullivan (1964)), a libel plaintiff suing a news medium with regard to a lie about a public figure must prove that the medium acted “recklessly” in publishing the lie. The reason for this high standard is our First Amendment and our freedom of the press. We Yanks don’t want to “chill” news reporting by making news media liable for honest mistakes.

But this was not a single lie. It was part and parcel of a longstanding pattern and practice of slandering, belittling and deriding France and Europe—the very places that gave us Yanks our Enlightenment values and an instruction book for our democracy.

Those of us who understand how crude, extreme and yet effective a propaganda machine Fox has become will never believe this was an honest mistake. On the contrary, it seems part a relentless campaign to tar France and its leadership as “wimpy,” “socialist,” and generally unworthy of respect, let alone emulation. It’s part of an appeal to our basest Yankee nationalism and pride, an attempt to get us Yanks to ignore one of our best, oldest and wisest friends.

Were it not for the support of the French Marquis de Lafayette, our nation would not exist. Nearly a century ago, our own Colonel Charles E. Stanton, speaking for General Pershing, noted this debt to France, which we can never fully repay. Speaking at Lafayette’s tomb during World War I, he declared, “Lafayette, we are here!”

But France has done much more for us Yanks than allow our national birth to occur. Over the centuries, its great thinkers, philosophers, scientists and engineers have helped teach us Yanks what “liberty” is and how to manage both liberty and a modern technological society effectively and gracefully. Even the bloody French Revolution and its imperial aftermath helped teach us Yanks what not to do.

Today, quietly and without fuss, France is in the vanguard of nations on four issues, all vital to our entire species’ future.

France’s advanced electrical power grid uses clean nuclear energy for nearly three-quarters of all France’s electricity. Despite this heavy reliance on nuclear energy, France has never had a serious nuclear accident. As a result, France today is our species’ least national abuser of the Faustian fuel coal.

With its small but potent “force de frappe” (strike force) of nuclear weapons, France taught the world decades ago (or tried to) that the sole useful purpose of nuclear weapons is deterring aggression and avoiding war, not facilitating first strikes or threatening others, let alone destroying the world.

Third, in recent years France has been in the front lines of the struggle against Islamist extremism and terrorism, as well as piracy on the high seas. In the Gulf of Aden, in Libya, and in Mali France has not hesitated to use military force to impose minimum levels of civilized behavior.

Finally, France today is teaching us all how to grow food sustainably and locally, to keep it fresh and savory and enjoy it immensely. Anyone who has ever visited France and tasted its superb local cheese, produce, food and wine can recognize our grossly polluting Yankee industrial-scale agriculture for what it is: a human and environmental abomination, which (among other things) breeds “superbugs.”

With any luck, Paris’ suit against Fox will reach our Yankee Supreme Court. The suit raises a number of novel and undecided questions. Can a foreign municipality be a “public figure”? How does a longstanding pattern and practice of belittling and demonizing a target of relentless propaganda affect the legal standard of “recklessness” in a libel lawsuit? Does a halfhearted retraction and “apology,” which Fox has made, make up for decades of willful and deliberate condescension and minimizing, if not demonization? And if not, what can and should the law do about it?

Some so-called legal “experts” have reportedly dismissed the lawsuit as frivolous. But Paris should go ahead with it. The suit is novel in many ways. It’s hardly just a matter of an injured individual with an overweening ego affronted by a single falsehood. It’s a matter of a decades-long, consistent effort on the part of history’s worst and most effective propaganda machine to insult, malign and demonize an entire nation for ulterior political motives, most of them senseless, sensationalist, or downright evil.

With modern computer transcription and searching, Paris’ lawyers should be able to collect a mountain of evidence at little cost and effort. All they have to do is search the vast archives of Fox propaganda for the words “France” and “French” in the vicinity of words like “wimp,” “weak,” “socialist,” “timid,” “Communist” “useless ally,” and the like. The results of this search—and the extremism, consistency and longevity of the slander that it no doubt will reveal—will surprise even people like me who despise Fox and all it represents.

Whether our First Amendment permits all this is something that our courts have, to my knowledge, never decided. The Nazis did something similar to the Jews in Germany and the rest of Europe. The Nazis’ propaganda was more extreme but less extensive than Fox’ in time and space. Isn’t it about time for humanity to develop some basic standards of honesty, integrity and ethics in portraying various ethnic and national groups, especially on the part of powerful private institutions that insist (contrary to all sense and evidence) on keeping the word “news” in their corporate titles?

So Paris and France deserve their day in court. At the end of the day, France is our nation’s best friend, with the possible exception of England. (England is, by the way, the only nation ever to have sacked our Yankee capital, in the War of 1812.) Quietly and without fuss, the French can teach us Yanks some important lessons about how to live and get along in the world, if only we would listen.

So as the lawsuit takes shape, let all our real news media give it front-page coverage. And let every civilized Yank, who knows history and our many debts to France, raise a glass of fine French champagne or humble bordeaux and declare, “Vive la France! Vive Paris! Vive la liberté!”

Update: 2/16/15

Apparently Paris is serious. Its city council has approved the lawsuit.

Godspeed. May Paris win and make Fox and its shareholders pay dearly for two decades of cheapening and brutalizing our Yankee civilization and—because we Yanks are still global leaders, mostly by default—our human species.