Crossroads on Global Infrastructure

SUBHEAD: Massive infrastructure projects could prevent sustainabity while undermining Earth's life support systems.

By Brent Blackwelder on 9 February 2015 for The Daly News -
(http://steadystate.org/crossroads-on-global-infrastructure/)


Image above: Rendering of concord an interior concourse in the latest plans for futuristic London airport to be located on Thames Estuary by architects from Genseric, who built dozens of airports, and are one of the largest consulting companies in the world. From (http://raredelights.com/the-futuristic-airport-in-the-world/).

Plans by the world’s most powerful countries are well underway to spend trillions of dollars for new mega-infrastructure projects to rejuvenate the global economy.

The hope of the G-20 nations, the World Bank, China, and other powerful actors is that the infusion of several trillion dollars for infrastructure will boost the growth of GDP by 2.1% over current trends by 2018 and rescue a “sluggish” global economy.

The new feature of this approach to infrastructure involves expanded use of public money (taxes, pension funds, and aid) to offset the risks involved in huge projects. The approach also relies heavily on public-private partnerships, where the issue of accountability and failed projects has been a serious concern.

Those seeking a sustainable, true-cost, steady state economy should be alarmed at the new approach to global infrastructure because trillions of dollars spent on mega-projects in the energy, transportation, agriculture, and water sectors could put a sustainable, true cost economy further out of reach. Reviews of completed projects in these sectors have raised questions about corruption, cost overruns, fiscal accountability, human rights abuse, and the alarming destruction of natural resources.

Who are the Major Players?
The primary mover of a global infrastructure plan has been the G-20 nations (see here for the list of member countries). Afraid of being marginalized by the G-20, the World Bank has jumped into the scramble. In October of 2014, the World Bank launched a new Global Infrastructure Facility to reclaim the leadership on global infrastructure from the G-20.

Just before the G-20 Summit last November, the World Bank and the IMF, along with seven multilateral development banks, issued a press release announcing their intention to provide $130 billion annually for infrastructure financing.

In 2014, China launched the Asian Infrastructure Investment Bank with 21 Asian countries as founding members, along with $100 billion in capital.

The Crossroads
A momentous choice is before us. On the one hand, the G-20, the World Bank, and other international lending institutions want more mega-highway projects, more centralized electric power plants and electricity grids, more mega-dams and gigantic irrigation schemes with huge water transfers, and the like.

On the other hand, an entirely new approach to infrastructure is possible. An approach that, for example, eschews big central electric power plants and relies more and more on decentralized wind and solar investments and avoids the horrendous mistakes made in the past in transportation, energy, water, and agriculture.

Those interested in a true cost, steady state economy should advocate change in the massive new infrastructure lending so as to support projects that enable society to stay within the carrying capacity of planet earth. Such projects could lead the way toward a different type of global economy as they shift away from the business-as-usual approach in energy, transportation, water, and agriculture.

We know the impact of too many of these schemes is the destruction of ecosystems and undermining of the life support systems of the earth. They are pushed by the economic or finance ministries that have little understanding of the limits to growth, the significance of biodiversity, and the functioning of ecosystems that make life on earth possible. Environmental ministries are likely to have little influence in the choice of mega-projects.

There is not enough time to present the infrastructure investment choices in energy, agriculture, water, and transportation that would be made in a steady state economy, so I will mention a couple of examples in the transportation sector.
 
Consider the unsustainability of the US transportation system that has focused almost entirely on highways to the neglect of passenger and freight rail and public transportation.

The US is a poor transportation model for the world. Even with state and federal gasoline taxes, the revenues are insufficient to halt the massive deterioration of road and bridge networks, to say nothing of billions of dollars of backlog in deferred maintenance.

The United States let passenger railroads go to hell and allowed the movement of more and more freight by trucks rather than trains (which are three to four times more energy efficient than trucks). This proved to be the wrong infrastructure choice.

Decades ago, some US bankers were questioning the viability of maintaining the infrastructure to support sprawling suburbs. A Bank of America report likened the servicing of sprawling suburbs to the nightmare that a military commander would face in trying to keep a 1,000-mile-long battlefront line supplied with food and ammunition.

Take a look, for example, at transportation required to supply our food.

One study in Germany focused on a container of yogurt on a grocery store shelf where all of the ingredients were available locally, but in this case had traveled over 1,000 kilometers to reach the distribution center. A greater emphasis on local food production could result in dramatically reduced “food miles” and utilize a much smaller transportation network–an affordable network that could be maintained.

We are at a critical moment where two approaches to infrastructure are diverging. The infrastructure path of a true cost economy can lead to smaller-scale, smarter infrastructure and a healthier earth. The proposed path of the G-20 and World Bank, on the other hand, will replicate and intensify numerous unsustainable projects and cause human civilization to exceed the carrying capacity of the earth.

Scientists point out that we are already consuming about one-and-a-half planets’ worth of resources. Infrastructure choices need to be made to alleviate rather than exacerbate this situation.

Note: For more information see the report by Nancy Alexander, “The Emerging Multi-Polar World Order: Its Unprecedented Consensus on a New Model for Financing Infrastructure Investment and Development,” Heinrich Böll Foundation.

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Defribulating the Economy

SUBHEAD: The US Federal Reserve will decide our economic fate beginning tomorrow. Let us pray. Image above: Jumpstarting the dollar. By Juan Wilson By Neil Irwin on 1 November 2010 for Washington Post - (http://www.washingtonpost.com/wp-dyn/content/article/2010/10/31/AR2010103103818.html) The Federal Reserve is preparing to put its credibility on the line as it rarely has before by taking dramatic new action this week to try jolting the economy out of its slumber. If the efforts succeed, they could finally help bring down the stubbornly high jobless rate. But should the Fed overshoot in its plan to pump hundreds of billions of dollars into the economy, it could produce the same kind of bubbles in the housing and stock markets that caused the slowdown. Or the efforts could fall short and fail to energize the economy, leaving a clear impression that the mighty Fed is out of bullets - thus adding even more anxiety to an already dire situation. The meeting of Fed policymakers Tuesday and Wednesday is set to be a defining moment of Ben S. Bernanke''s second term as chairman of the central bank. Although he helped win the war against the great financial panic of 2008 and 2009, he now risks losing the peace if he fails to end the protracted economic downturn that followed. Just two years after the world financial system nearly collapsed, it is again gut-check time for Bernanke. "The greatest risk for the Fed in taking this action is that it could extend the economy's funk by giving a sense that either no one is in charge or that the people who are in charge can't get it right," said David Shulman, senior economist at the UCLA Anderson Forecast. "The whole psychology of that could leak back into the economy." Jobs and prices The Fed is charged by Congress with a twin mandate of maintaining maximum employment and stable prices, and it is failing on both counts. The economy isn't in free fall. But as new data on gross domestic product affirmed Friday, the economy is mired in mediocre growth, too slow to bring down the unemployment rate. Inflation, meanwhile, is running about 1 percent, below the rate Fed officials view as optimal. When inflation is a little higher, it encourages consumers and businesses to spend money before it loses value. "Viewed through the lens of the Federal Reserve's dual mandate," William C. Dudley, the New York Fed president, said in a speech early last month, ". . . the current situation is wholly unsatisfactory." When Bernanke was confirmed earlier this year for a second four-year term, the widespread assumption was that his major task would be to decide when and how to move away from the unconventional measures taken during the crisis to boost growth. In reducing its target for short-term interest rates to zero, the Fed had exhausted its normal tool for managing the economy. So the central bank pumped money into the economy by buying vast quantities of bonds - more than $1.7 trillion worth. Now the Bernanke Fed is poised, if not to double down on that earlier bet, at least to up its wager. "Phase one was to avoid a complete market meltdown and something akin to the Great Depression," said Mark Gertler, a New York University economist who has collaborated with Bernanke on academic research. "Phase two begins now and is in some ways trickier. . . . Once again we're in a situation where we have to use policies we haven't really experimented with." The Fed is seeking to avoid the fate of Japan, where falling prices and weak economic growth over the past two decades have created a self-reinforcing economic stagnation. The hope is that by moving aggressively, such a cycle can be averted. Fed watchers expect that the two days of meetings around a giant mahogany table will culminate this week in the announcement of around $500 billion in Treasury bond purchases and perhaps a statement indicating a willingness to make even more. The intended benefits are already being felt. In anticipation of the Fed's action, investors have driven down mortgage rates, creating an extra incentive for people to buy a home. Expectations have also driven the stock market up, making Americans feel wealthier. And the dollar has fallen in value, making U.S. exporters more competitive, as currency investors reacted to an expected decline in U.S. interest rates. But there's a danger that the bond purchases could work too well. For example, while a modest decline in the dollar could be good for the economy, a steep and disorderly drop could be disastrous. And while Fed leaders want the inflation rate to be higher than it is now, if prices were to accelerate rapidly, that would be unwelcome. There's also a risk that investors could view the Fed's program of buying Treasury bonds as a signal that the central bank essentially plans to fund U.S. budget deficits indefinitely by printing money. That could prompt interest rates to rise, stymieing the economic recovery. Thomas M. Hoenig, president of the Kansas City Fed, appears likely to dissent from the Fed's decision this week. He said in October that such measures "could be a very dangerous gamble," given the risk of stoking asset bubbles, for instance in the stock market. If, on the other hand, the efforts to jump-start growth fall flat, the Fed would be confronted with an even knottier quandary: take even bolder steps, such as a trillion-dollar round of bond purchases, or admit that these kinds of measures won't work and stand pat. Encouraging spending Ultimately, the question of whether the Fed can invigorate the economy depends on whether companies, individuals and even the government respond to lower interest rates by spending and investing. Rates have been at exceptionally low levels for more than a year and corporate America is in sound shape financially, yet companies are holding back on hiring more employees and making new investments. Executives say they lack confidence that consumers will boost demand for products, because Americans are busy paying down debts. Some economists argue that the volume of bond purchases needed to jar the economy into motion again is vastly larger than what the Fed has seriously considered. Larry Meyer, a former Fed governor now with Macroeconomic Advisers, estimated last week that it would take more than $5 trillion worth, 10 times what analysts are expecting. Fed leaders deem such gargantuan numbers too risky. Either way, if the Fed overshoots or falls short, it could undermine the faith of the public and the financial markets in the ability of the government to address prolonged high unemployment and the risk of falling prices. At a time when investors are already skittish about gridlock in Washington, such doubts could spook financial markets, creating a self-reinforcing downward cycle in the economy. (By contrast, the U.S. economy flourished from the mid-1980s until 2008 in part because investors and businesses were confident that the Fed would keep the nation on a steady growth path.) A failed effort by the Fed could also prompt renewed calls to limit its authority and independence at a moment when popular discontent over its role in bailing out the financial system has already made the central bank a target for many in Congress. But some partisans of the Fed are urging it take dramatic new steps even if there's a chance they don't work. "I think the public understands that if unemployment remains high, monetary policy isn't going to be the reason," said Victor Li, a Villanova professor and former Fed economist. "No one is going to say the Fed isn't doing everything it can. .

Massive Public Layoffs Warning

SUBHEAD: Obama warns of massive layoffs of public sector teachers, police, and firefighters. Image above: Sesame Street teachers, firemen and police get laid off... especially teachers. Mashup by Juan Wilson.

By Staff on 13 June 2010 in Huffington Post - (http://www.huffingtonpost.com/2010/06/13/obama-warns-of-massive-la_n_610401.html)

[Editor's note: This is an excerpt from article that is part of White House effort that appears to be an attempt to shore up stimulus effort and delay pain of joblessness that is coming.]

On Saturday night, the White House released a letter Obama sent to congressional leaders of both parties asking for nearly $50 billion in emergency aid to state and local governments to fend off "massive layoffs of teachers, police and firefighters" and to prevent a possible double-dip recession.

"We are at a critical juncture on our nation's patch to economic recovery," the president warned. "It is essential that we continue to explore additional measures to spur job creation and build momentum toward recovery, even as we establish a path to long-term fiscal discipline. At this critical moment, we cannot afford to slide backwards just as our recovery is taking hold."

In an interview with the Washington Post, White House Chief of Staff Rahm Emanuel "said the letter is intended to settle the growing debate over the opposing priorities of job creation and deficit reduction and 'where you put your thumb on the scale.'"

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Act Two of Economic Collaspe

SUBHEAD: Our economic problems are hardly over as public debt rises and stimulus fades away.

By Zoe Schneeweiss on 10 June 2010 in Bloomberg News -
(http://www.bloomberg.com/apps/news?pid=20601010&sid=aY_SHqr1LQhk)

 
Image above: Carton of Double Dip flavored swizzler sticks over 1929 stock crash headline. Mashup by Juan Wilson.

Investor George Soros said “we have just entered Act II” of the crisis as Europe’s fiscal woes worsen and governments are pressured to curb budget deficits that may push the global economy back into recession.

“The collapse of the financial system as we know it is real, and the crisis is far from over,” Soros said today at a conference in Vienna. “Indeed, we have just entered Act II of the drama.”
Soros, 79, said the current situation in the world economy is “eerily” reminiscent of the 1930s with governments under pressure to narrow their budget deficits at a time when the economic recovery is weak.

Concern that Europe’s sovereign-debt crisis may spread sent the euro to a four-year low against the dollar on June 7 and has wiped out more than $4 trillion from global stock markets this year. Europe’s debt-ridden nations have to raise almost 2 trillion euros ($2.4 trillion) within the next three years to refinance, according to Bank of America Corp.

“When the financial markets started losing confidence in the credibility of sovereign debt, Greece and the euro have taken center stage, but the effects are liable to be felt worldwide,” Soros said.

Soros gained fame in the 1990s when he reportedly made $1 billion correctly betting against the British pound. He also wagered that Germany’s mark would appreciate after the collapse of the Berlin Wall in 1989 and that Japanese stocks would start to fall in the same year. His firm, Soros Fund Management LLC, manages about $25 billion.

Credit default swaps, which aim to protect bondholders against the risk of a default, are dangerous and a “license to kill,” Soros said today. CDSs should only be allowed if there is an insurable interest, he said.
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