The Sanders Miscalculation

Senator Bernie Sanders has been calling for “rebuilding America’s infrastructure,” particularly in reference to roads and bridges, for some years now. It’s his preferred way of having both a jobs program and a stimulus to the economy. It’s a simple and straightforward idea that, according to conventional economics, would work for both jobs and stimulus.

So what’s the problem? We need only mention the issue of global warming/climate chaos/acidification of the oceans. It should be instantly obvious that roads and their bridges are entirely the wrong infrastructure for a massive rebuilding program. This sort of stimulus would encourage further growth in the sort of economy we should be getting away from. instead of intensifying existing problems, we should create a more sustainable transportation system, economy and society.

Bernie’s program might have been workable for the Great Depression of the 20th Century. He will not succeed in leading us back to that time, nor should we try to follow him there. Conditions have changed considerably since then. The resources to make it work no longer exist. They have literally been burned.

What makes the automotive and trucking economy unsustainable is not just the increasing negative effects of emissions from the fossil fuels it takes to keep this economy running. The fuels themselves have been depleting since the first operation to extract them from the earth. Many of the cheap and easy sources are already depleted to the point that traditional mines and wells are closed. Replacements for traditional mines and wells are more expensive, consume more energy for extraction operations and are more destructive of the environment. Think fracking, mountaintop removal and deep-sea drilling platforms.

There is some price for fossil fuels that is so high it destroys demand for the fuel. In other words, the high price chokes off activities that depend on these fuels. The fossil fuel that powers about 96-97 percent of transportation is oil. The price principle applies to coal and natural gas as well.

There is also some price for fossil fuels so low that it destroys production from expensive sources. In other words, The low price makes some mining and drilling operations not profitable, and the mines or wells are abandoned.

It is not possible to determine exactly what the demand-destroying high price is for the entire oil industry, or the entire coal industry, or the entire gas industry. It is also not possible to determine the exact investment-destroying low price for the same industries. Each operation of extraction and each act of consumption will have a different price, so determining the effect of a given market price is necessarily sort of “fuzzy,” in the sense of “fuzzy logic.”

It’s also somewhat slippery. The slipping comes from variation over time in the value of a dollar, and the value of all the other currencies for which dollars might be traded. The ruler we are trying to use to measure prices shrinks and grows, so that over time, the measurement loses meaning. In 1970, a new Volkswagen cost around $2000. Now, it would be difficult to find a stripped-down model for $20,000. The very same house that could be purchased for a market price of half a million dollars in 2005 might not be able to sell for 300 thousand dollars in 2010.

Though it is both slippery and fuzzy, in principle there still is some high price for fossil fuels that will cause the fossil fuel economy to shrink. There is also some low price that will cause “production” (extraction) of these fuels to shrink. And depletion causes the minimum price to support extraction to rise over time.

When the minimum price to support extraction collides with the maximum price that allows the economy to function, we have an economic crisis which cannot be solved. At that point there is no price which will allow economic growth and increased extraction. The fossil fuel economy collapses. That’s what is meant by “no solution.” The question is, are we close to that point now?

We saw the US economy crash in the late 1970s, when the OPEC oil embargo artificially forced prices of oil over the high price red line. We saw it again in 2008, when without any such embargo, demand pushed the price to nearly $150 per barrel.

Today, as oil drops to around the $70 per barrel mark, we see a lot of concern that oil companies are losing money on fracking operations, and they are drastically cutting back investment on exploration of potential new deep-sea drilling sites.

It’s approximate, and slippery as ever, but we have some rough idea of a maximum and a minimum price that works for the industrial market economy. Just a decade ago, oil prices in the $20-30 range were “normal.” That gives us a clue that the minimum and maximum prices have been converging, as depletion has its effect on the cost of finding and developing new oil.

Now we have two big trends converging on the conclusion that rebuilding the infrastructure of roads and bridges is not a good idea. Massive reconstruction would require manufacturing great quantities of concrete, steel and heavy construction equipment. This would greatly increase the rate of carbon dioxide emissions into our atmosphere. It would also encourage further commitment to a transportation system which creates still more of the same emissions. And all this activity would increase the rate of depletion, bringing closer the convergence of prices which promises a crisis for the entire fossil fuel economy.

That is, if we followed Bernie’s recommended policy, we would be making an investment which is not just destructive to the climate, but is also destructive to the industrial economy. But just keeping this industrial economy puttering along is also destructive, just a bit slower.

It’s a dilemma, and not one easy to solve, or even necessarily one possible to solve, if “solving” means continued economic growth. Possibly we will have to recognize that economic growth is not forever possible, and that we will need to survive a long period of disappearing industry while keeping freedom and justice for all intact.

Clearly, before the price convergence destroys both demand and investment at the same time, we should be investing in clean energy (wind and solar). We should do as much as possible to get ahead of the depletion curve by deliberately reducing fossil fuel demand with measures for conservation and efficiency. That would delay the price convergence, giving us more time to develop low-energy local production of essentials such as food.

If any transportation system should be redeveloped, it should certainly be neither roads nor airports. We should focus on rail for both freight and passengers, because that is efficient, and should be the best use of declining resources for transportation.

Of course, the last couple of paragraphs contain a misleading use of “we.” “We should …” is a shorthand method to avoid the tedious repetition of “Government laws, taxes and other policies should be directed toward …” It avoids the repetition, but sort of slides past the fact that “we” are not in charge of government policies. We don’t even have much influence over policies. We aren’t even close. We are not multi-national corporations.

Now that’s a political problem. It is the political problem the Green Party and other movements are working on. But at least, if we do manage to make government policies work for us instead of against us, we have some clear ideas of what those policies should be.

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