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View Full Version : Manufactured scarcity and the Green movement: Manufactured Scarcity and the Profits of DeIndustrialization



c1ue
10-16-11, 01:50 PM
I do not know if I agree with this in the general case, but absolutely it is correct in the specific one (PG & E and Enron).

Either way, an interesting look at profits and the secular humanist ecology movement.

http://www.metamute.org/en/manufactured-scarcity-the-profits-of-deindustrialisation


<label>By </label>James Heartfield

'Green capitalism': a new paradigm of sustainable production or a licence to shut down plants and print money? Basing this article on excerpts from his recent book, James Heartfield looks at the case of Enron, an influential pioneer in increasing profits by cutting output
Of course companies that sell climate change solutions stand to benefit as greenhouse gas emissions come to bear a price tag.
– Daniel Esty Hillhouse, Professor of Environmental Law, Harvard University[1]
The corporate raiders of the 1980s first worked out that you might be able to make more money downsizing, or even breaking up industry than building it up. It is a perverse result of the profit motive that private gain should grow out of public decay. But even the corporate raiders never dreamt of making deindustrialisation into an avowed policy goal which the rest of us would pay for.

What some of the cannier Green Capitalists realised is that scarcity increases price, and manufacturing scarcity can increase returns. What could be more old hat, they said, than trying to make money by making things cheaper? Entrepreneurs disdained the ‘fast moving consumer goods’ market.

Of course there is a point to all this. If labour gets too efficient the chances of wringing more profits from industry get less. The more productive labour is, the lower, in the end, will be the rate of return on investments. That is because the source of new value is living labour; but greater investment in new technologies tends to replace living labour with machines, which produce no additional value of their own.[2] Over time the rate of return must fall. Business theory calls this the diminishing rate of return.[3] Businessmen know it as the ‘race for the bottom’ – the competitive pressure to make goods cheaper and cheaper, making it that much harder to sell enough to make a profit. Super efficient labour would make the capitalistic organisation of industry redundant. Manufacturing scarcity, restricting output and so driving up prices is one short-term way to secure profits and maybe even the profit-system. Of course that would also mean abandoning the historic justification for capitalism, that it increased output and living standards. Environmentalism might turn out to be the way to save capitalism, just at the point when industrial development had shown it to be redundant.

From Megawatts to Negawatts

One of the most destructive examples of manufactured scarcity is ‘clean energy’ and California’s ‘Negawatt Revolution’.

In 1997 the Club of Rome collaborated with Amory Lovins of the Rocky Mountain Institute to launch a new report ‘Factor Four’ that promised to ‘halve resource use’ while doubling wealth. The message was that you could get rich saving the planet. A privileged few did indeed double their wealth; but for the rest it was just a case of halving resources.

Immodestly, Lovins made his own California energy scheme the main example of savings in ‘Factor Four’. His well-paid advice to the State of California was that it was a big mistake to adopt a system that rewarded increased electricity output with increased profits. Such a system would naturally tend to boost output. Instead, rewards for cutting energy use were needed. Rather than getting paid for additional megawatts the utility companies should be rewarded for saving power use: negawatts.

The impact of Lovins’ model on energy generation in California was decisive. ‘Around 1980, Pacific Gas and Electricity Company was planning to build some 10-20 power stations’, according to Lovins.
But by 1992, PG&E was planning to build no more power stations, and in 1993, it permanently dissolved its engineering and construction division. Instead as its 1992 Annual Report pronounced, it planned to get at least three quarters of its new power needs in the 1990s from more efficient use by its customers.[4]
Of course the PG&E was not getting three quarters of its new power needs from anywhere: it had just reduced its output. But manufacturing energy scarcity did indeed grow somebody’s cash wealth: Enron’s. With these artificial caps on energy production the generating companies could start to hike up the charges to utility companies, including PG&E, now unable to meet its own customers’ demands. Those energy companies were owned by Enron.


ENRON: ENVIRONMENTAL CHAMPION

‘One US energy giant, Enron, has emerged as the world leader in renewable energy investment,’ said Climate Institute President John Topping. ‘Enron has significantly lowered the cost of renewable energy, and triggered energy industry investment in both solar and wind power. Ken Lay has spearheaded this effort by Enron.’ In 2001 Enron led corporations in the Pew Centre on Global Climate Change lobbying for the US to sign the Kyoto agreement. EPA Climate Protection Award, 1998

Enron received this award in recognition of its ‘exemplary efforts and achievements in protecting the global climate.’ Enron was one of 19 individuals and organisations chosen from an international field and judged by an international panel selected from industry, government and international non-governmental organisations.


Chief Executive Kenneth Lay turned Enron from a company that made its money generating power into one that made its money trading finance. Whatever else it was doing, there was no denying that Enron was cutting back its own CO2 emissions and getting rich doing it. One company memo stated that the Kyoto treaty ‘would do more to promote Enron’s business than will almost any other regulatory initiative’.[5]

Amory Lovins’ negawatt revolution in California was Enron’s wet dream. Having shut down its own generation capacity, PG&E was at the mercy of Enron’s market manipulation. Buying surplus electricity on the open market PG&E was royally fleeced, losing $12 billion. Utility bills rose by nine times between May 2000 and May 2001. Enron took advantage of the restricted market and cut electricity to California. They even invented reasons to take power plants offline while California was blacked out. Enron officials joked that they were stealing one million dollars a day from California.[6| The PG&E that Lovins held up as a model went bankrupt and had to be bailed out by the State of California.
http://www.metamute.org/sites/www.metamute.org/files/u73/9781906496173_mute_29_Page67_Image001.jpg
The negawatt revolution in California was supposed to reward savings and alternative energy generation. In the event manufacturing scarcity only rewarded Enron’s crooked speculators, while penalising consumers.

Sadly, the lessons of the ‘negawatt revolution’ have been buried in the outrage about Enron’s fraudulent market manipulation. Few people noticed that Enron’s executives were taking advantage of an artificial scarcity in energy supply engineered by Amory Lovins and the PG&E working in close association with Enron’s favourite green lobby, the National Resources Defence Council.[7]

Few of Enron’s critics noticed that it was the very model of an environmentally friendly, post-industrial company and one that had taken Amory Lovins’ goal of doubling wealth by halving resource use to heart. Saving energy is of course good sense ? as long as that is done by resource efficiency. The Club of Rome’s claim that manipulating market prices to create incentives for reducing energy output which, in turn, can create efficiency is confused. All that achieved was an artificial shortage ? the condition for ramping up utility bills. The old-fashioned market incentive for energy efficiency is the savings people make on their bills when they insulate their homes, or turn down the air conditioning. Businesses, too, have every interest in keeping overheads low by using the energy they pay for wisely. Normal prices would give customers the incentive to reduce their electricity consumption.

But amazingly the Enron-Lovins model of restricting supply is the one that is being adopted around the world. Utility companies are rewarding consumers for reducing their consumption from central power stations and encouraging domestic-sited energy generation, through windmills and solar panels. Playing on Californians’ distrust of the power companies, the Environmental Protection Agency is planning to add solar power to one million new homes – paid for by another surcharge on utility bills.[8] In Britain, the government is introducing regulations to make all new homes carbon-neutral. The current goal of carbon-neutral homes reverses the division of labour that saw specialised energy producers distribute electricity, turning it into an 18th century cottage industry. The simple economic lesson that mass production avoids reproduction of effort has been lost. Nothing could be more wasteful, or more certain to create new scarcity.

California’s ‘negawatt revolution’ is only one of the more extreme versions of the way that green priorities work in tandem with profiting by manufacturing scarcity. South African radical Dominic Tweedie argues that recent electricity blackouts there happened because of ‘a campaign to impose artificial scarcity’. The failure to build power stations to meet the growing demand from South Africa’s black townships was not recognised as a problem by activists there because they bought into the green prejudice that social aspirations could be met by redistribution alone, at the expense of increased output. Now supply companies are hiking up prices to the people who can least afford them.

From Negawatts to Nega-Nosh

Elsewhere, food supplies are failing because the European Union and the United Nations have pursued a 20-year policy of retiring land from production to arrest the fall in farm prices.

Engineering the retirement of farmland is largely a way of easing small farmers (who had been protected under the old Common Agricultural Policy) out of farming altogether. It has not hurt the larger agribusinesses, which are thriving. Not surprisingly, farm goods are a target for speculators, like ’70s corporate raider, Jim Slater, whose new Agra Firma was started up to take advantage of booming prices. The reduction in excess output has in the last few years pushed prices up again, after long decades of falling food prices. In Italy, consumers boycotted pasta because prices rose so high; in Mexico, Tortilla Rallies protested against price rises, and in India there have been onion demonstrations.[9] The Economist estimates that food prices rose by one third in the year to December 2007 (having fallen by three quarters between 1975 and 2005).[10] According to the mainstream media, the pressure of biofuels and global warming are to blame for the shortfall in crops – as if governments had not been involved in a twenty-year programme of retiring land from production. Today’s scarcities have been engineered, in the name of saving the environment, but in fact to defend the livelihoods of big agriculture.

Setting caps on energy production, industrial output, car transport and house-building in the name of saving the environment all have the effect of damaging people’s standard of living. But as we have seen, that does not stop individual businesses from making big profits out of those caps. Trading in carbon rights, making windmills, carbon offsetting schemes, and organic food are all ways of making profits out of artificial limits set upon growth.
http://www.metamute.org/sites/www.metamute.org/files/u73/9781906496173_mute_29_Page70_Image001.jpg
Info

James Heartfield’s Green Capitalism: Manufacturing Scarcity in an Age of Abundance is published by Openmute. This article is based on excerpts from the book

Footnotes
[1] The Green List, The Guardian supplement, p.29, 5 November 2007.
[2] See Karl Marx, Capital, Volume Three, ‘The law of the tendency of the rate of profit to fall’, London, Lawrence and Wishart, 1959, pp.211-240.
[3] 'The Origin Of The Law Of Diminishing Returns', Edwin Cannan, 1813-15, Economic Journal, vol. 2, 1892.
[4] Amory Lovins, L. Hunter Lovins and Ernst von Wiezsacker, Factor Four: Doubling wealth, halving resource use, London, Earthscan, p.160.
[5] How Environmentalists Sold Out to Help Enron, PR Watch Newsletter, Third Quarter 2003, Volume 10, No. 3.
[6] 'Tapes Show Enron Arranged Plant Shutdown', The New York Times, 4 February 2005.
[7] PR Watch Newsletter, op.cit.
[8] The Guardian, 6 August 2004.
[9] Jonathan Watts, ‘Riots and hunger feared as demand for grain sends food costs soaring,’ The Guardian, 4 December 2007.
[10] ‘Cheap no more’, The Economist, 6 December 2007.

c1ue
10-16-11, 02:13 PM
Some interesting additional notes on the economics of being green and capitalism:

http://www.culturewars.org.uk/2008-03/heartfield.htm


As Heartfield points out, ‘Some of the world’s wealthiest people are also its greenest. More and more of them make their money being green – they are the pioneers of Green Capitalism.’ (p21). Big corporations now routinely publish sustainability and social responsibility audits, while the likes of Exxon, Philip Morris, Du Pont and Monsanto all heavily subsidise environmentalist critics (p31). The appearance of confrontation between indignant greens on the one hand, and chastened capitalists on the other, is deceptive. According to Heartfield, it is more of an internal squabble than a real struggle between two rival social groups:
Green activists rubbish corporate environmentalism as ‘greenwashing’. But the truth is that most of the leading green activists – [Lord] Melchett, Tony Juniper, Jonathan Porritt, Des Wilson, Sara Parkin, the New Economics Foundation – have made a very good living writing Corporate Social Responsibility documents … Greenies get jobs as consultants and trainers, hectoring the unenlightened suits. When green activists frame their criticisms aggressively, that is often just their way of negotiating a better deal. (p31)
From the libertarian perspective, the capitalists’ eagerness to flatter the hippies is exasperating. But this is only because libertarians buy into capitalists’ mythologising of themselves as bold entrepreneurs. The reality is that capitalists make ‘a living out of the hard work of other people. They told stories about themselves that cast them as the hardworking, thrifty ones who built up the company (while the workers themselves were generally cast as too lazy to get on)’ (p14). In effect, libertarians reverse the argument made by their green and anti-globalisation opponents. Instead of rapacious corporations wrecking the planet, for libertarians it is rapacious governments that are the problem, expropriating the capitalists’ hard-earned wealth and tying them up in red tape.

But the corporate willingness to embrace green regulations and put the hippies on the payroll becomes less puzzling if one is willing to view capitalism not just as a sphere of economic activity distinct from the rest of society, but as a fully-fledged social system. After all, a society that prioritises profit over human need will always be one that is predisposed to curbing human needs. It is here that Heartfield’s argument packs a potent punch. The green call for restraining human needs in favour of nature’s imagined demands complements the requirements of capitalist society, which is always in need of new mechanisms to discipline and curb demands from below for more of the social surplus. Capitalism is also a contradictory social system, oscillating between dynamic expansion and lethargic stagnation. Heartfield argues that the greens merely express one aspect of capitalism – its tendency toward restraint – against its more dynamic side.

In other words, green capitalism is not a passing fad adopted by a few corporate bosses, too spineless to stand up to the hippies; it expresses an essential feature of the social system. As Heartfield reminds us, the origins of modern environmentalism lie in the 1970s when the elite industrialists of the Club of Rome commissioned The Limits to Growth report. As the long post-war boom ended, arguing that the world was running out of resources was another way of saying that there was nothing left to redistribute, and that trade unions must settle for lower wages (p27). (Needless to say, the Club of Rome’s predictions about the exhaustion of natural resources were all confounded [p13]).

In his artful dissection of ethical consumerism, Heartfield demonstrates what demands for economic moderation mean for today. In Heartfield’s view, ethical consumption is little more than the traditional snobbery of conspicuous consumption dressed up in green garb. Far from restraining consumption, environmentalism inflates its scale and scope, so that it expresses not only the refined taste but also the superior morals of the (rich) consumer: ‘It could be stated as an economic law: the greener you are, the more you consume. If that seems a bit hard to swallow, let’s break it down. First, the richer you are, the greener you are. Second, the richer you are, the more you consume.’ (p50). When greens disparage consumption, their real target is mass (ie ordinary folks’) consumption. Jetting off on safari and paying to offset your carbon emissions is fine, but hopping over to Prague on Easyjet for a wild weekend is morally abhorrent.

Heartfield shows that the contradiction runs deeper than the hypocrisy of rich greens like Al Gore and Leonardo DiCaprio telling us all to make do with less.

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