Thursday, May 17, 2018

Alexander Hamilton versus Shareholder Value - HAWB December 1790

How America Was Built: Alexander Hamilton versus Shareholder Value - HAWB December 1790

This past month I made a concerted effort to read the major reports to Congress submitted by First Secretary of the Treasury Alexander Hamilton. These reports are the foundation documents of the USA economy. And no, the USA economy was not based on the ideas of British imperial economist Adam Smith, whose ideas Hamilton flatly rejected in his reports.

The Second Report on the Further Provision Necessary for Establishing Public Credit was submitted to Congress on December 13th, 1790, and is often referred as The Report on a National Bank. In one section, where Hamilton explains the best structure for a central bank, he propounds a system of proportional shareholder representation in which no one "person, copartnership, or body politic" was allowed more than 30 votes, no matter how many shares they owned. Since this was a Founding Father prescribing a system of corporate ownership that was entirely at odds with the business management ideas of shareholder value, profit maximization, private equity, etc., etc., that have predominated for around the past half century, I was amazed when I began checking various biographies of Hamilton and found that none had pointed to this important fact.

Hamilton's plan of shareholder voting, if it had been extended beyond the central bank to other corporations, would have hampered, if not entirely crippled, the corporate raiders who destroyed tens of thousands of USA industrial facilities--beginning in the 1960s "go-go" years of mergers and acquisitions; the 1970s through 1990s "leveraged buyout" pirates like Michael Milkin and Kohlberg Kravis and Roberts; and contemporary "private equity" scammers like Peter G. Peterson's and Stephen A. Schwarzman's Blackstone Group; David Rubenstein's and Caspar Weinberger's Carlyle Group; Leon Black's Apollo Global Management; and Mitt Romeny's Bain Capital.

Hamilton agreed that larger shareholders should have a larger vote, but he clearly saw the danger that "a few principal Stockholders" could seize control of "the power and benefits of the Bank." Hamilton knew that to preserve the new experiment in republican self-government, any such  dangerous concentration of economic power would have to be guarded against . Hamilton wrote:
“A vote for each share renders a combination, between a few principal Stockholders, to monopolise the power and benefits of the Bank too easy. An equal vote to each Stockholder, however great or small his interest in the institution, allows not that degree of weight to large stockholders, which it is reasonable they should have, and which perhaps their security and that of the bank require. A prudent mean is to be preferred.”
But how to maintain the economic equality required to maintain republican government? Clearly, under a system of "one share, one vote," large concentrations of wealth could easily procure control of the bank. Accordingly,  Hamilton proposed that no shareholder should have more than thirty votes:
“XI. The number of votes, to which each Stockholder shall be entitled, shall be according to the number of shares he shall hold in the proportions following, that is to say, for one share and not more than two shares one vote; for every two shares, above two and not exceeding ten, one vote; for every four shares above ten and not exceeding thirty, one vote; for every six shares above thirty and not exceeding sixty, one vote; for every eight shares above sixty and not exceeding one hundred, one vote; and for every ten shares above one hundred, one vote; but no person, copartnership, or body politic, shall be entitled to a greater number than thirty votes.”
This is what Hamilton's scheme of shareholder representation looks like:

# of shares     # of votes
        1                       1
        2                       1
        3                       2
        4                       2
        5                       3
        6                       3
        7                       4
        8                       4
        9                       5
      10                       5
      11                       5
      12                       5
      13                       5
      14                       6
      15                       6
      16                       6
      17                       6
      18                       7
             .   .   .   .   .
      22                       8
             .   .   .   .   .
      26                       9
             .   .   .   .   .
      30                       10
             .   .   .   .   .
      36                       11
             .   .   .   .   .
      42                       12
             .   .   .   .   .
      48                       13
             .   .   .   .   .
      54                       14
             .   .   .   .   .
      60                       15
             .   .   .   .   .
      68                       16
             .   .   .   .   .
      76                       17
             .   .   .   .   .
      84                       18
             .   .   .   .   .
     92                       19
             .   .   .   .   .
   100                       20
             .   .   .   .   .
   110                       21
             .   .   .   .   .
   120                       22
             .   .   .   .   .
   130                       23
             .   .   .   .   .
   140                       24
             .   .   .   .   .
   150                       25
             .   .   .   .   .
   160                       26
             .   .   .   .   .
   170                       27
             .   .   .   .   .
   180                       28
             .   .   .   .   .
   190                       29
             .   .   .   .   .
   200                       30
             .   .   .   .   .
   300                       30
             .   .   .   .   .
 1,000                      30
             .   .   .   .   .
10,000                     30
             .   .   .   .   .
100,000                   30
             .   .   .   .   .
1 million                 30

Hamilton’s scheme of shareholder representation, had it been applied to all corporate ownership, not just a national bank, or banks in general, would have prevented the corporate raiders of the past half century who deindustrialized the USA, broke unions, looted pension funds, closed factories and relocated them overseas. This financial malfeasance has destroyed the USA working class--which now suffers declining life expectancy--and is now robbing the middle class of a better future It is not just fair, but vitally important, to infer that Hamilton was strongly opposed to anything like the "financial engineering" and "private equity" of today. And he certainly would have rejected Milton Friedman's, Michael C. Jensen's and William H. Meckling's ideas of maximizing profit and shareholder value.

Note also that Hamilton's scheme is clearly unfavorable to increasing concentrations of economic wealth. Holding 12 shares gives the holder only one half the number of votes. Holding 36 shares gives only one third. Holding over 100 shares gives only one fifth. Holding 1,000 shares gives the holder only 30 votes, or a mere 3/100 the number of votes. Holding 10,000 shares or one million shares, and the holder still gets only 30 votes. The more vampire-wealth held, the less weight each share of vampire-wealth is allowed. Here we see Hamilton carefully balancing the republican need for economic equality with the need to avoid alienating owners of wealth, even vampire-wealth.

What does a concentration of wealth look like today? Here is a partial list of companies that have been "acquired" and "reorganized" by just one private equity group, Bain Capital: AMC Theatres, Artisan Entertainment, Aspen Education Group, Brookstone, Burger King, Burlington Coat Factory, Canada Goose, DIC Entertainment, Domino's Pizza, DoubleClick, Dunkin' Donuts, D&M Holdings, Guitar Center, Hospital Corporation of America (HCA), iHeartMedia, Sealy, Sports Authority, Staples, Toys "R" Us, Warner Music Group, Fingerhut, The Weather Channel, and Apple Leisure Group, which includes AMResorts and Apple Vacations. This list is copied directly from the Wikipedia entry on Bain.

If you want to see more such concentrations of wealth, just follow the links for each outfit listed on Wikipedia's list of Largest private equity firms by PE capital raised.

Throughout the reports, Hamilton explicitly wrote that the primary goal was to promote the general welfare and the public interest. In discussing the problem of a bank’s directors, officers or stockholders who may fear that “an extension of capital” to new enterprises may cause “a diminution of profits,” Hamilton wrote that “the interest and accommodation of the public” must be held superior “to the interest, real or imagined, of the Stockholders.” Hamilton expounded on this particular concern a year later, in Section VII of his December 1791 Report to Congress on the Subject of Manufactures, where he wrote

"Experience teaches that men are often so much governed by what they are accustomed to see and practice, that the simplest and most obvious improvements, in the most ordinary occupations, are adopted with hesitation, reluctance, and by slow gradations….

The apprehension of failing in new attempts is, perhaps, a more serious impediment. There are dispositions apt to be attracted by the mere novelty of an undertaking; but these are not always the best calculated to give it success. To this it is of importance that the confidence of cautious, sagacious capitalists, both citizens and foreigners, should be excited. And to inspire this description of persons with confidence, it is essential that they should be made to see in any project which is new—and for that reason alone, if for no other, precarious—the prospect of such a degree of countenance and support from government, as may be capable of overcoming the obstacles inseparable from first experiments.

Hamilton's discussion of the need for active government measures to counteract the natural inclination to do business "the way we've always done it," is followed in the Second Report on Credit by what can only be considered another broadside against the idea of shareholder value:
“It is true, that unless the [interests of the shareholders] be consulted, there can be no bank (in the sense at least in which institutions of this kind, worthy of confidence, can be established in this Country) but it does not follow, that this is alone to be consulted, or that it even ought to be paramount. Public utility is more truly the object of public Banks, than private profit. And it is the business of Government, to constitute them on such principles, that while the latter [private profit] will result, in a sufficient degree, to afford competent motives to engage in them, the former [public interest] be not made subservient to it.” [Emphasis added.]
Elsewhere, Hamilton wrote that “…such a Bank is not a mere matter of private property, but a political machine of the greatest importance to the State.”

While there obviously must be enough profit in establishing and operating a bank to make it an attractive business enterprise, at the same time Hamilton saw that the maintenance of republican principles of government requires that all concentrations of wealth and economic power be rendered subservient to the general welfare.  To ensure the public interest was always paramount, Hamilton prescribed another safeguard on the proposed bank's power:
V. The capacity of the corporation to hold real and personal estate shall be limited to fifteen millions of Dollars, including the amount of its capital, or original stock. The lands and tenements, which it shall be permitted to hold, shall be only such as shall be requisite for the immediate accommodation of the institution....
In Hamilton's plan, the bank would be allowed to only own such property as it required to actually operate as a bank. It would not be allowed to own other banks and other companies. It would not be allowed to own its own trading portfolio. Imagine how this restriction would have prevented the rise to power of the new robber barons like the late deficit scold Peter Peterson, or 2012 Republican presidential nominee Mitt Romney. It would have prevented Wall Street's domination of the rest of the economy. And, the USA political scene would undoubtedly look much different, and much more beneficent, than it does today.

It should also be noted--given that many doctrinaire leftists and many historically ignorant progressives condemn Hamilton for having designed a capitalist system that favors the rich and the powerful--that the first example in USA history of a corporation stepping far beyond its charter was the Manhattan Company, which was formed in 1799 for the stated purpose of building a fresh water supply system for the southern part of Manhattan Island. This was a ruse: the company quickly became a highly profitable competitor to the Bank of New York, which had been established in June 1784 by a group led by Hamilton. The Manhttan Co. merged with Chase National Bank in 1955 to form the Chase Manhattan Bank, which in turn acquired J.P. Morgan Bank in 2000 to become the current JPMorgan Chase & Co. The animating spirit behind the deceitful Manhattan Company was Aaron Burr, who murdered Hamilton in a contrived duel in 1804.

Another safeguard Hamilton imposed was the mandated rotation of bank directors and officers to prevent the emergence of cabals and old boy networks. “The argument in favour of the principle of rotation is," Hamilton wrote, that it lessens "the danger of combinations among the Directors [intended] to make the institution subservient to party views, or to the accommodation... of any particular set of men..."
“When it is considered, that the Directors of a Bank are not elected by the great body of the community, in which a diversity of views will naturally prevail, at different conjunctures, but by a small and select class of men, among whom it is far more easy to cultivate a steady adherence to the same persons and objects; and that those Directors have it in their power so immediately to conciliate, by obliging the most influential of this class, it is easy to perceive, that without the principle of rotation, changes in that body can rarely happen, but as a concession which they may themselves think it expedient to make to public opinion.”
Finally, in accord with his argument that a bank was much more important as an instrument of public good, than merely as a machine of private profit. Hamilton argued that the government should be able to thoroughly inspect the financial posture and strength of the bank at any time of the government's choosing.
“There is one thing, however, which the Government owes to itself and to the community; at least to all that part of it, who are not Stockholders; which is to reserve to itself a right of ascertaining, as often as may be necessary, the state of the Bank, excluding however all pretension to controul… If the paper of a Bank is to be permitted to insinuate itself into all the revenues and receipts of a country; if it is even to be tolerated as the substitute for gold and silver, in all the transactions of business, it becomes in either view a national concern of the first magnitude. As such the ordinary rules of prudence require, that the Government should possess the means of ascertaining, whenever it thinks fit, that so delicate a trust is executed with fidelity and care. [Emphasis added.]
It may be objected that these restraints on corporate power and safeguards of the public interest were devised by Hamilton only for the central bank he proposed, and not for all corporations. It should therefore be understood that capitalism, at this time, did not really exist. At least, the word as used today did not come into general usage until after the 1850s and the publication of Marx's Capital. More specifically, the corporate form of economic organization did not become widespread until after general acts of incorporation began to be adopted by state legislatures in the 1820s. And, Hamilton's plan for the Bank of the United States was informed by his experience in creating and directing the Bank of New York. More to the point, was the example of the Bank of North America (chartered by the Pennsylvania legislature in 1781), which had been “‘all but crippled’ during the 1790s because a few powerful borrowers had monopolized its funds,” according to Henry Hansmann & Mariana Pargendler in the January 2014 Yale Law Journal

But the crucial historical consideration is that Hamilton was building a nation and a republican form of government from scratch, with only the historical examples of monarchical, oligarchic, and despotic forms of economic organization as possible guides. From these historical examples the only certain desideratum was that economic concentrations of wealth must be restrained. The history of Great Britain and especially the British East India Company, was a constant reminder of how economic power can arrogate political power to itself, and use political power to further expand its holdings of vampire-wealth.  At the same time, Hamilton realized that  concentrations of wealth must not be so fettered and repressed that the quickening impulse of the profit motive is stifled. Thus the unusual scheme of shareholder representation, which would undoubtedly be anathema to today's captains of pirated industry such as Sheldon Adelson, Eddie Lampert, Robert Mercer, Nelson Peltz, and T. Boone Pickens. All the poison pill provisions of the 1980s and 1990s were unable to stop the looting and asset stripping of USA industrial companies. Imagine how much easier it would have been to protect industry from predatory finance if the most votes a shareholder could ever have was 30, no matter how many shares of a company's stock they amassed.

This again shows that the modern doctrine of shareholder value is directly contrary to the design for republican political economy, and inimical to the continuation of republicanism. The second great tragedy of American history, after slavery, is that capitalism has replaced republicanism. Yet there remains echoes of republican ideals in the body politics: this is why the majority of Americans feel things are going the wrong way, and resent the emergence of a new a new ruling class of corporatist oligarchs.

In great irony is that as economic power becomes increasingly concentrated, the USA is becoming less, not more, capitalistic: According to the 2018 Corporate Longevity Forecast, by Innosight, the average age of USA companies is now half what it was in the 1970s. In 1964, the average age of companies listed on the Standard and Poors 500 stock market index was 33 years. This average age had fallen to 24 years in 2016, and is now projected to fall to just 12 years within the next decade.

And, from another study, in 2013:

 
From Will capex come back? UBS Investment Research, by Andrew Cates, January, 10, 2013, page 3.



Graph is from Ian Hathaway and Robert E. Litan, Declining Business Dynamism in the United States: A Look at States and Metros, The Brookings Institute, May 2014.

USA capitalism has evolved in a direction that would have outraged Alexander Hamilton. Just look at Kohlberg Kravis and Roberts, the leveraged buyout corporate raiders that have poured tens of millions of dollars into the Republican Party and movement conservatism in the past three decades. KKR's $25 billion purchase of RJR Nabisco in 1989 was flagged by at least one Wall Street insider as being far above fair market value; the transaction only made sense when consideration was given to the opportunities provided for laundering of dirty money by RJR Nabisco's high-volume sales of consumer goods. This is a crucial point most Marxists and others on the left miss: USA capitalism in the past half century has fallen under the control of a ruling class that, in outlook, intent, and effect, is basically criminal, not entrepreneurial. This ruling class is not a legacy of Hamilton's program for nation building; it is, rather, a throwback to the slave-trading, opium-peddling ruling merchant class of the British empire, which has never discarded its innate hatred for the idea of republican self-government.

Thursday, May 10, 2018

Checking on climate change predictions


Because I am spending so much time on the subject of climate change these days, I am having trouble understanding the bigger picture at times. Let me explain.

For years I have been astonished by the ability of the charlatans to muddy the waters on what is really pretty simple science. I have claimed that it should be clear to anyone who stayed awake during 7th-grade science class. But as I worked through the problem of illustrating the CO2 molecule a few weeks back, it dawned on me that there are almost aesthetic reasons why CO2 is such a remarkably stable molecule. And the reason I know that is because I stayed awake for the first week of high school chemistry when bonds were described. My 7th-grade claim is bogus—10th grade Chemistry!

So I asked Tony, "Even though Chemistry is taught in almost all high schools, what percentage of the population signed up to take Chemistry and actually understood what a covalent bond is when it was taught?" His guess was less than 10% of the population. Whatever the number, it is probably small and nowhere nearly as large as the percentage of people who cannot really pass judgement on climate change because they lack the scientific background and are forced to trust someone else's credentials. I believe that this is a subject where the facts should speak for themselves—that there is probably nothing in human history that has been more validated in so many ways as climate change. But it probably should be asked, "How confident should one be in just presenting the facts when less than 10% of the population is equipped to process just the facts?"

Which leads to question 2: "If and when the world gets serious about doing something meaningful about climate change, what part of the population will be required to do the heavy lifting?" The truth is, replacing the fire-based infrastructure with something more sophisticated will require mostly highly skilled people. What good does it do to rile up people who are probably not qualified to do anything more than cheer (at best)?

Sunday, May 6, 2018

Flat earth believers


Tony sent me this link. He probably thought I needed help getting going. He understands the "value" I put on folks who spread pure nonsense. Actually, the flat earth crowd doesn't even enter my radar because unless they are employed setting airline routes, it hardly matters what folks believe about the shape of the earth.

However, the sort of "thinking" that goes into this quite-common behavior is downright dangerous. And it is sadly not confined to the lunatic fringe. As pointed out below, this sort of thinking is quite common in the social sciences—Michel Foucault claimed that what the author wrote was nearly irrelevant compared to the power relationships that impacted his writing. Pontius Pilate had a French philosopher asking "what is truth?" I went through a period where the ability to quote Foucault was a sign of intellectual seriousness.

Because I had formulated my facts-as-building-blocks approach to epistemology before I had ever heard of Foucault, I pretty much dismissed him as another typical Leisure Class thinker. If you live in a world where being right or wrong is not terribly important, you tend to skip over learning the skills an aero engineer must learn to design something that punches a 550 mph hole in the air and the biggest problems for the passengers are crying babies and bad food. Anyway, Michel, there are many writers who are scrupulously concerned about being absolutely accurate—some even go so far as to provide illustrations.

This is just another way to avoid doing homework.  IF you know the science or other important facts, coming to a conclusion about the accuracy of another's testimony is routine. If you do not have the background to evaluate the information, you must fall back on judging the speakers based on his or her dress, hairdo, necktie, sexual history, political party, etc. Or the power arrangements.

That's the problem with climate science. The folks collecting data on the front lines have no doubts about whether climate change is real. The rest of us must either evaluate the data from second-hand sources with the required scientific (high school chemistry) background or else from random decisions based on sociology, rumor, or slander. In this way, the climate doubters have managed to stalemate an incredibly important public debate even though the facts are overwhelmingly against them.

Saturday, May 5, 2018

410 ppm and counting


It's getting hard to keep up.

It required 146 years for the CO2 concentration in the atmosphere to go from 275 ppm to 290 (1750-1896) when Arrhenius first postulated that CO2 would change the climate. Recently, the 400 ppm mark was breached in 2013 and has now passed 410 ppm only five years later. This is truly a scary development. Climate scientists talk about tipping points where melting permafrost and other disasters will trigger runaway climate change. The question now becomes, have we already passed one or more of those tipping points?

We probably won't find out any useful information on this topic from the main media outlets. They are much more interested in the decade-old claims of a fading porn star against a president who wasn't even a politician when it happened. Got to love those folks specializing in trivialities.

Thursday, May 3, 2018

Hudson on debt cancellation


Michael Hudson has a new book coming out. It addresses the most fundamental economic question of the age—what to do about the unpayable debt. The reason I am so interested in this subject is that IF the austerity geeks get their way, there will not be the money needed to build the solar future.

Coming from the rural Midwest, I have heard these debates for a long time—even one that Hudson highlights below—his contention the Christianity was about progressive economics. The King James translators had it right when they wrote the Lord's Prayer as "forgive us our debts, as we forgive our debtors." Most Protestants have wimped out and changed this radical notion to "forgive us our trespasses, as we forgive those who trespass against us." Last I heard, the Presbyterians still use the older, more accurate version. Considering the implications, I am not sure that reopening that wound is wise since it is as old as Christianity itself. The religion of slaves become the religion of the Roman Emperor in only 300 years so it is not especially surprising that the interests of the creditor classes would come to dominate—even so far as to rewrite the freaking Lord's Prayer. (Where are the fundamentalists when you need them ;-)

And of course, this is Hudson so he gets it right. I wish he would take up the subject of "odious" debt (and maybe he does in his new book). The way I see it, because we can no longer operate our societies with technologies that produce CO2, all investments in these technologies should be written off as "odious." Actually I don't give a damn what reasoning is used so long as there is a serious global debt restructuring.

Sunday, April 29, 2018

Are we doomed?


In a recent post, I mentioned that there is a growing body of belief that it is now too late to save ourselves from the disaster that is climate change. This little bit of news made working on a "solution" video incredibly difficult. I should have given examples of this school of thought but right on cue, The Guardian put up a story of someone who is firmly in the "We're doomed" category.

There is much to be valued in the case Mayer Hillman is trying to make. He is a social scientist and anyone looking at the sociology of climate change has more than ample reason to be alarmed. I am constantly distressed at the irrelevant efforts even gifted climate scientists engage in whenever they venture beyond shouted warnings. I shudder to think of the major heel-dragging when the financial sector is told they MUST fund the transition to the solar-powered future. I am amazed at the number of people with fancy degrees from fancy colleges who believe utter nonsense because they never really learned 7th-grade science or the difference between a big number and a very small one.

Hillman is mostly right. But there are reasons to think he maybe looking at the wrong people. There are MANY such reasons but two are most significant to me:

1) In spite of being woefully underfunded, the people who have been beavering away at making solar panels have performed a miracle. Most of the world's populations live in sunny climates. Cheap solar energy will transform their lives. Replacing the fire-based infrastructure in the more "developed" economies will be more difficult, but $.75 a watt with no fuel costs is a POWERFUL argument. Climate change is a Producer-Class problem and they have done well in this esoteric world. Energy is everything—we cannot solve any of the other environmental problems until we solve the energy dilemma. But now we have an incredibly important tool—a working replacement for fire itself.

2) I am incredibly impressed with the net-zero house my brother built for himself. Everything works and since the solar panels are on the backyard side of the roof, there is no way this solar house announces itself. The systems are virtually noiseless and there is plenty of hot water. But this outcome was far from easy. My brother brings a lot of skills to the table along with a lifetime of accumulating tools—he has LOTS of them and knows how to use and maintain them. He always reads the manuals. In short, he is far from being a run-of-the-mill DIY. He more resembles those frontier inventors like the Wright Brothers (and Thorstein Veblen's father who figured out ways to make harsh places like Minnesota habitable.) He subscribes to the first law of Peirce's Pragmatism—if something isn't working, then try something else. So out of the misinformation and boastful claims of the solar world, he was able to distill enough useful information to build his complicated house from parts he could buy online—and make it work. I am not suggesting that anyone could have done this—that is obviously NOT the case. But is demonstrates that it CAN be done and those who think the solar future will be painful and ugly are just wrong.

Wednesday, April 25, 2018

Building a net-zero house


A couple of days ago, I saw my brother grinning broadly and occasionally giggling. The occasion for this mirth was a recent encounter with his meter-reader for the local utility company—Duke Energy. The news was that last month his photo-voltaic cells had generated roughly 300 kw of electrical power more than he had consumed. While much of this joy is due to the fact that he was billed the $9.86 minimum for being connected to the grid while most of his neighbors were getting $350 bills for homes of similar sizes, the giggling was probably due to the idea that he is "sticking it to the man."

Tony heard this story yesterday and insisted I explain what was involved in producing such a house. So this morning I asked and while his story was hardly complete, it highlighted the parts he thought important. So in no particular order, here they are.

1) His property in the country was large enough so the house's site orientation was pretty much anything he wanted. So the house's ridge line runs east-west, the roof pitch was selected to maximize solar gain, and the overhangs are large enough so the south wall is completely shaded between the equinoxes.

2) The holding tank for the solar hot water heater was located close to the showers so the water used to get hot water on start-up is minimized.

3) The air handler for the air conditioning system was located smack dab in the middle of the house which does wonders for efficiently distributing the cool air.

4) Room for the insulation was designed in from the beginning. The exterior walls were framed with 2 x 6 studs and the roof trusses were scissor-type which made for higher ceilings while provided plenty of space for 16" of insulation.

5) Because excessive heat was the primary problem in Florida, aluminized Mylar was chosen for the moisture barrier.

6) The steel roof was put on sleepers which allowed the underside of the roof to stay cooler and dry.

7) The original air conditioning compressor was a SEER 13, which in 1992 was the most efficient unit one could buy. It was replaced in 2010 with a SEER 18.

And so on. They key to understanding this house is that VERY important decisions that significantly affected long-term performance were made in the planning stage. None of the features mentioned above cost much to implement but have saved thousands in energy costs over the years. As I have said since the 1980s, pollution is a function of design.

Then in 2008, the decision was made that photo-voltaic cells were now inexpensive enough so adding them to the mix should be cost effective. This was pretty easy to do because the roof was already pointed in the right direction. PV cells were still pretty spendy in 2008 so only 5 kw were purchased. By 2011, the costs had dropped significantly so another 5 kw were added which leads to the monthly grinning when the meter is read.

So while the costs of building a solar home from scratch are not much more than conventional construction, retrofitting an existing house is difficult, time-consuming, AND quite expensive—even though the price for PV cells is now lower than $1 per watt.

Monday, April 23, 2018

Looking at America


When I first saw Al Gore's An Inconvenient Truth I had two quite powerful reactions. I loved the excellent first half where he explained the science of climate change. The second half, where he attempts to describe what actions should be taken to mitigate the problem, was just plain awful. I spent much of that time asking rhetorically, "Al, did you really watch the first half of your own movie? Do you REALLY believe you can prevent the ice caps from melting by talking people into hanging their wash out to dry?"

Since then, I have concentrated my efforts on the problem "What can we do to address climate change effectively?" The way I see it, there are at least 50,000 highly qualified scientists working diligently on the science of climate change but almost no one is giving serious consideration to what sort of actions are required to build a society that does not destroy the atmosphere. The reasons for this are complex but they must include examinations of the sociology, economics, engineering, and other social interactions that make it extremely difficult for populations to actually reduce the amounts of greenhouse gasses they generate. So while the climate scientists keep coming up with frightening warnings about what will happen if nothing changes, nothing changes. In fact, the situation continues to worsen.

So when I decided to address climate change, I was determined to concentrate on the solution end of the problem. Spoiler alert—this is a lot harder than it looks. There are excellent reasons why the best minds on the planet go scurrying for cover whenever the talk turns to remediation. But did this stop me? No-o-o-o! And quite honestly, the effort exhausted me.

I have a friend who has been doing video documentaries since the 1970s. One of his core beliefs is that nothing attracts or holds attention like pictures of big equipment doing big jobs. When the subject is the massive amounts of carbon we are pumping into the atmosphere, big equipment is just everywhere. After awhile, these pictures—especially the ones showing the Germans strip-mining brown coal—triggered near clinical depression. Here is Germany—arguably the finest example of "green" technologies in action—mining 170 million tons of the dirtiest fuel in 2017 because it is their only fuel source still cheaper than solar.

Staggered by my renewed exposure to the vast, complex, and necessary machinery that produces CO2 in the course of normal operations, I added to my woes by exploring the increasing evidence that there is already so much in the atmosphere that even significant reductions in output wouldn't actually help all that much. For these folks, it's already too late.

And then the weather got very strange. By now, there has probably been more snow in Minneapolis to set new all-time records. Turns out that the same kink in the Jet Stream that almost eliminated winter in Alaska was bringing misery to the lower 48 including 4 Nor'easters in three weeks to New England and points south.

Of course, the government was doing nothing. Trump is struggling to form a government and the Democrats, saddled with an acute case of Trump derangement syndrome, have busied themselves with restarting the Cold War because it is easier to blame Russia for their political woes than to examine the dozens of perfectly valid reasons why they lost the election of 2016.

So I decided to take a road trip to escape the crazy winter and to celebrate the progress I did make on my climate change video. I had few plans but I wanted to see Tony in North Carolina and visit my brother in Florida. By the time I reached Illinois, I had named it my "Chill Out and Lighten Up" tour. Things were going as planned when my fuel pump took a dump just outside of Dayton Ohio—at 3:00 on a Sunday morning. By the time I got back on the road on Monday afternoon, I had managed to blow a $1000 hole in my travel budget.

My stay in Xenia Ohio was an eye-opener. There were no cabs to transport me from my cheap hotel to the shop where my car was to be fixed so I entered the world of Uber. Trust me, no one goes into private transportation unless other better forms of employment have dried up. I said to one driver, "Dayton was a famous and important town while I was growing up. How's it doing now?" I got an earful of the tale of Dayton's deindustrialization. I knew enough about Ohio's role in supplying parts for the auto industry so I took a shot, "Did you even lose Delco (the folks that manufactured the electronic parts for GM)?" He looked like someone who had just lost a child. Tony would later explain that Delco stood for Dayton Electronic Corporation and had been in the GM family from almost the beginning. I didn't know.

Tony was getting ready for the big model engineering show in Detroit. His business has taken a hit in the last few years—probably because the sort of people who make complicated things for fun are dying out. He keeps plugging away and has made significant progress on his book How America was Built. Mebane North Carolina was once the home to runaway textile manufacturing from New England. In the past couple of decades, they kept on running to places like Bangladesh and Vietnam. Developers have turned some of the old mills into housing but the original housing stock for the textile workers was very modest. On the other hand, I visited a niece whose husband is an engineer for AT&T. They live close to the research triangle near Raleigh. That neighborhood had some very nice housing.

The drive to central Florida went off without a hitch. My brother's splendid net-zero house is more wonderful than I had expected. In some ways it is like a hippie's dream house except everything works and was carefully and lovingly crafted. The Orlando area, OTOH, is an environmental nightmare—2.4+ million permanent residents and 51 million visitors per year. With no visible signs of central planning, it is a city built by real estate developers who think nothing of putting up 2000 homes on a two lane road with the hope the infrastructure will catch up. Traffic is a nightmare. On his side of town they have opened 3 large high schools in 12 years. Downtown Orlando is a forest of tower cranes. And in all that building in the center of the Sunshine State, there are probably less than 500 solar homes.

My recovery from near exhaustion goes slowly. This little thing took five days to write and I have left out a lot. My brother's house is very impressive and because he built it himself cost less than $150,000 including solar panels when they were still pretty spendy. So in theory, the solar future shouldn't be so difficult or expensive. But watching him in action explains why so little progress gets made—he is very organized, clever, and understands the market for the components of such a complex house. The typical lefty who is confused by any tool more complicated than a fork couldn't build such a dwelling in a hundred years and would still spend bucketloads of money in the process.

Hope to get back to fixing my video soon. Wish me well.

Wednesday, April 11, 2018

Getting serious about climate change


My last post had an embed video that was the second half of the video I have worked so hard on. That post was a mistake. But since Grandpa Smet provided such a serious comment, I decided to post the first half on purpose.

The reason this was so hard is because I am trying to suggest that the only serious route to a climate change solution is to put major resources into putting the Industrial Classes back to work building the new fire-free society. Since most of modern culture barely admits that the Industrial Classes are even a thing, I am sailing in uncharted waters. Fortunately, the evidence for my POV is substantial but it means I must bring clarity and reason to a subject that rarely is treated to either.

Anyway, enjoy this attempt. I am pretty happy with it but there is always room for improvement and the project is still loaded into Final Cut Pro so minor changes are very easy. This video is still unlisted but if you want to pass around the link to your friends, I approve.

I am visiting Tony in North Carolina. The drive down included a fuel pump failure in Xenia Ohio. They still have the sorts of mechanics I associate with Ohio but the Dayton area is still staggering from decades of Industrial job losses. Getting such people back to work seems like the most important task I have left.


Monday, April 9, 2018

News of the real economy



3D printing of parts compared to CNC machining
The American Society of Mechanical Engineers' magazine Machine Design is offering a free download of an article that compares CNC machining with 3D printing, while recognizing that each has its place, and can complement each other in the design and manufacturing workflow.

Nano-based Catalyst Turbocharges Oxygenation in Electric Fuel Cells
A catalyst that increases oxygen processing in fuel cells makes them much more economical for producing electricity. The breakthrough was achieved at the School of Material Science and Engineering at the publicly funded Georgia Institute of Technology.

Malaysia-Singapore consortia selected for Kuala Lumpur-Singapore high-speed rail line
MYHSR, which is responsible for building the Malaysian portion of the 350km Kuala Lumpur - Singapore high-speed line, has selected two consortia to design and implement the civil works for the project. The HSR line is scheduled to open in 2026. The two consortia comprise Malaysian Resources-Gamuda, which will be responsible for the northern portion of the alignment, and Syarikat Pembenaan Yeoh Tiong Lay-TH Properties, which will handle the southern portion. The contracts will be awarded when MyHSR concludes negotiations with the consortia.

Ontario committed to funding Toronto-Windsor high-speed rail
Ontario Premier Kathleen Wynne was at Info-Tech in London on April 6 to highlight the Canadian province's initial investment of more than CA$11 billion (US$8.6 billion) to build high-speed rail service between Toronto and Windsor. The 332km (206 miles) route is supposed to be completed by 2025.

Summary of BNSF rail network 2018 operations and service outlook
BNSF is the first Class I railroad to respond to US Surface Transportation Board’s March 16 blanket letter requesting information on each US freight railroad’s 2018 service outlook.

Aviation Week Podcast: How Lockheed's Skunk Works and SpaceX are Pushing the Edge
Listen in as Aviation Week editors discuss the unveiling of Lockheed's tailless UAV and SpaceX’s unique testing strategy.

SpaceX to Debut Falcon 9 Block 5 in April
The upgraded Falcon 9 Block 5 rocket--needed to ferry NASA astronauts to and from the International Space Station (ISS) and deliver U.S. national security spacecraft into earth orbit--will make its first flight to launch the first Bangladeshi geostationary satellite. Bangabandhu Satellite-1 was built by Thales Alenia Space for the Bangladesh Telecommunication Regulatory Commission. The Falcon 9 Block 5 was designed by SpaceX to deliver a 4,020 kg (8,860 lb) payload to Mars.

Friday, April 6, 2018

the money pitch


Whoops. The post of this Youtube was a mistake. It was only a third draft. I was extremely tired when I got done and a foul-up uploading the two videos caused me to do some seriously goofy things. In this case I ask folks to contact a Patron page. Well, we don't even HAVE a Patreon page yet.

Soon.

In the meantime, I am in North Carolina with Tony and we will try to solve the world's problems together ;-)

Thanks to all those who watched what was there. If I had made the same mistake with the video part 1, I might have even left it up—because it was closer to being done than Part 2.

Actually, I am pretty happy with the work that has already been accomplished.

Monday, March 26, 2018

Climate change basics


Because I have immersed myself in the interesting details of the progress in climate science, I sometimes forget how confusing the subject really is. In spite of the mostly unreasonable criticisms, most climate science research is reasonable, thorough, and in some cases, brilliant. But since those who run Big Media barely report on science at all and run the other direction at the slightest controversy, climate change is most certainly not covered like something "important" like whether a porn star should be able to disrupt the people's business.

Spend a couple of hours every day chasing a subject for many years tends to distort the assumptions of what people should know about the subject. So when climate change goes to court, the culture has attempted to move the understanding of how this works from scientists (who probably understood the concept of greenhouse gasses in 7th grade) to lawyers (who probably went to law school because they weren't very good in science.) So California judge William Alsup asks some good basic questions and Oliver Milman came up with accurate and concise answers.

This should probably be considered the minimum level of awareness of climate change. Thanks Oliver.

Sunday, March 25, 2018

Germany's dirty little coal secret


The other day, I went looking for some images / video of brown coal mining in Germany. Turns out Germany mines about 170,000,000 tons of the stuff every year to supply around 25% of her electric power. Ironically it seems to hang on because it is the only energy source for generating electricity cheaper than solar / wind. I mean, what else do you do with brown coal but burn it? It's not like you could turn it into the coke necessary to make high-grade steel.

Anyway, I found some video taken at 4K by a drone. Germans are often efficient because they love to build BIG things. This also explains why Germany, which has led the charge on renewables, still has one of highest per capita carbon footprints. Brown coal is dirty stuff but if you can scoop up thousands of tons per day with a few skilled operators, it makes "economic" sense to scoop.

The following article is from Australia. That country is providing China with a LOT of coal. So there is a whiff of "see, we are no worse than the Germans." But only a whiff. And I'll bet there are many Germans who hate the burning of brown coal as much as her neighbors.


Monday, March 19, 2018

Protectionism flickers to life


There are times when the conventional disgust with "protectionism" rises to the level of the outrage over pedophilia. Which is strange when you think about it. From Ben Franklin to Abe Lincoln to H. Ross Perot, there have been strong supporters of many of the ideas that the high tariff folks believed in so strongly. When a country is developing a sophisticated manufacturing base, the protectionists usually triumph. It is only when a country gets rich and imperial do the "free" traders win the day. The traders are a fraction of overall economic activity but when the dominant economic strategy favor traders over manufacturing, they get to write the rules in their favor.

Hudson is pretty good on trade issues. He's a ways from Lincoln but he's way better than your typical cable business talking head. So I thought he might celebrate the fact that Trump has at least moved the needle away from the free trade extremism as practiced since the late 1970s. Well, I was wrong. Hudson instead faults Trump for not having a coherent trade policy to back his Twitter outbursts on trade. Fair enough.

Me, I am happy that someone is reopening the Free Trade debate—which has been pretty dormant since the Battle for Seattle in 1999. Free trade has been such an unmitigated disaster there is barely time to count the ways. As someone who comes from the Naomi Klein wing of the DFL when it comes to trade issues, I find it a bit odd to hear some of our best arguments come from the mouth of Trump. I only hope he understands that by even questioning the free trade establishment, he has committed an unspeakable heresy and the the race is on among those who author papers glorifying the conventional economic wisdom to see who can denounce this sin with the greatest fervor.

Wednesday, March 14, 2018

Even the Paris 2015 climate accords won't solve the problem


Robert Hunziker is perhaps the politician that best understands climate change—and has for some time. He is running for a seat in Washington's 8th Congressional District. I certainly hope he wins.

Whenever I stumble across someone who has a profound and deep understanding of a subject, I am immediately curious as to how he came to be that way. I am especially curious if that person is young. His campaign literature sort of explains his enlightened worldview. Turns out that there CAN be some significant advantages to learning a society from the bottom up. So here's to someone who has had enough exposure to Producing Class virtue to understand that no matter how enlightened a Leisure Class actor, that person cannot build the sustainable future.

Monday, March 12, 2018

Infrastructure funding


Whenever I discuss possible solutions to climate change, it isn't long before someone demands, "How much will this cost??!! And how do you propose we pay for it?" These are in fact excellent questions because the MAIN reason why this civilization-threatening problem doesn't get seriously addressed is the sticker shock that occurs whenever someone gives a realistic estimate for a fix.

Then there's Ellen Brown who reminds us that the problem of not enough money should be the easiest problem to solve of all.  Then she gives us historical examples of why democratic money creation suggest the perfect solutions to the funding problems. Unfortunately, folks who saw the world like Ellen does mostly disappeared by the early 1950s so she has become an almost lone voice for a sane monetary and banking organization.

Which is all the more reason why she should be read.

Friday, March 9, 2018

Climate Tipping Points


Like many college students, there has been a sense when the subject was climate change that we could always "cram for the final" when things got really serious. Now I feel a shift in tone—there is a sense of urgency. Below are two short pieces that address why this may be so. The first addresses the new and truly frightening data the great scientific measurements can provide. While second talks about the disappearing paradise that was Santa Barbara California. Two different looks at impending doom and how close it may be.

Monday, March 5, 2018

The power of conventional wisdom


One of the smartest men I know once assured me that the "Zeitgeist cannot be changed—that's what makes it the Zeitgeist." OK. Except I know better. I grew up in the world created by the Keynesians of the Ken Galbraith variety. I watched it just disappear in the wake of the 1973 Arab oil embargo to be replaced by people who believed in ideas that supposedly had been forever discredited by the Great Depression. I still gasp at the sheer audacity of it all. It helped immeasurably that we had become a land of historical illiterates (The United States of Amnesia--Gore Vidal) so forgetting economic history was a trivial problem. And so the Zeitgeist changed from the Keynesians to the Monetarists in an historical eye-blink. Maoists become central bankers. And no, I most certainly do NOT believe all this happened by accident.

Even so, this was much easier than anyone could have imagined (or at least me.) The family business was running a church where I learned just how difficult it is to get folks to change their minds. Turns out well-funded think tanks can change quite a few minds. Jason Hirthler lays out a believable explanation for how and why this happened. Interesting reading.

Tuesday, February 27, 2018

DW examines what the oil giants knew about climate change


DW has produced an excellent documentary on the subject How much did the major oil companies know about climate change? Turns out they knew a very great deal. People who actually did some of the research are interviewed for the first time. This is quite remarkable.

The video has been pulled down from YouTube but can still be seen here.

Monday, February 26, 2018

Last Year Hottest ‘By Far’: World’s Oceans Top Temperature Records Again

Remember, air pollution is just a step on the way to becoming water pollution. This was the most memorable one-liner in a class on Energy and Public Policy I took in 1974. Of course, the big subject in those days was acid rain but the policy holds true for global heat retention. Whatever heats the atmosphere will eventually heat the oceans. 2017 was a record year for warming oceans. It was also a record year for damaging hurricanes with Harvey's damage to greater Houston at over $125 billion leading a $300+billion total in natural disasters.

Wednesday, February 21, 2018

A sense of urgency


Quite honestly, I do not know a great deal about Robert Hunziker. But on Monday, he wrote a piece that was special because it injected urgency into the climate debate. Urgency is a quality I often forget to stress both in my life and this blog. So I really appreciated his effort. If we are to escape the fire and energy trap we have built for ourselves, time is rapidly running out—if the goal is to build a post-fire civilization, we should have gotten serious about it in 1973. Projects take time. BIG projects take BIG time and effort. So rebuilding complete civilization, which is the biggest project I can imagine, will require trillions and a global effort.

In addition to reposting him below, I wrote him an email.
Your There is no time left was magnificently crafted—not to mention scary as hell.

As I see it, the fact that no one wants to talk about genuine climate change solutions is that the problem is SO large, very few can comprehend even a tiny segment of the big picture.

The basic problem is fire—that’s where most of the excess CO2 is generated. Making things worse, we are burning carbon that is millions of years old (coal, petroleum). And making this catastrophic, civilizations were designed to run on fire. This took humanity at least 6000 years to accomplish. If your essay is even partially correct, we have about 5 years to replace this incredible investment.

Part two is cultural. This sort of solution will absolutely depend on the kind of people who build the extremely difficult. While the idea of covering a cloudless hunk of the Gobi with solar cells is imaginative, it doesn’t work unless people figure out how to move that massive energy to China’s great cities. Since this has never been done before, it rivals the moon shot in complexity. (Five years, huh?) And yet, we live in a culture whose closest portrayal of the scientific and technological literate is The Big Bang Theory. Yet it is precisely these sorts of persons who have ANY chance of building the new and necessary world. At least we could stop making fun of them and learn what they must accomplish.

Rebuilding complete civilizations will be expensive. We need the world’s central banks to change policy so that the end-fire project is properly financed. Unfortunately, the people who pull the large levers of monetary policy share a fatal flaw—they are scientifically and technologically illiterate. Yet they can either ensure a new civilization or watch the one we have burn to a crisp. Time to make a new qualification for potential central bankers—they MUST be able to demonstrate an understanding of what it means to live in a fire-based civilization.

Congratulations