The Shape of the Future

E M Risse

Beyond the Headlines

A thread runs between many newspaper stories: Higher energy prices are reordering everything from international trade flows to housing affordability. Too bad our Agencies are responding so sluggishly.

The WaPo front page on 30 July carried a story about the collapse of the current attempt to wrap up the Doha round of global trade agreements: “Trade Talks Crumble in Feud Over Farm Aid.”   

The same issue of WaPo also provided news of the latest demonstration of global food chain insecurity. The focus was the angst over why it took months to find the source of salmonella in jalapeno and serrano peppers from Mexico .

Knowing something about both issues, our first thought was:

What a great opportunity to address these two issues together and put some real support behind the effort to create a universe of Regional Food Priority.

The benefits of short supply chains for food are enormous – cut energy consumption in transport, improve food security, avoid chemicals and hybridization driven by the need for transport-proof food and extended shelf-life, provide beneficial use for the excess land speculatively held for future urban development. That land will never become functional urban enclaves now that the end of cheap energy is finally sinking in – it has only taken 35 years.

If you went to a farmers' market over the weekend, you know a lot of the good reasons to shorten the supply chain. If you did not, call the Virginia Ag folks. They, and others, are finally starting to beat the drums. But think how much more effective a clear federal policy would be, especially if it were supported by some of the billions of dollars being thrown at (and thrown away on) existing farm subsidies. 

The reasons for a policy supporting Regional Food Priority are legion. Among them the US of A could stop protecting fat cat farmers with high tariffs, and thus end half the Doha dispute. Let India and China protect its farmers, France too. But protect them by having farmers in the Regions produce food for their Regions. Expensive energy means more expensive food anyway so it might as well be tasty and safe. I know, I know, the issue is more complex but Doha is a place to start, even if you have never been to Qatar .

So far we have seen no one make the connection between Doha and the opportunity to improve food security.

On Friday WaPo’s Steven Pearlstein takes the Doha collapse in a whole new direction. (An aside: How can WaPo hire and publish columnists like Pearlstein and Samuelson who regularly hit issues right on the head but then publish editorials and provide news coverage that is off by miles? Usually square miles. WaPo frets about its tanking revenue. Maybe it should try becoming a real news outlet. See THE ESTATES MATRIX.)

Pearlstein’s column (“Wave Goodbye to the Invisible Hand, Farewell to Free-Market Capitalism”) opens with observations about the cyclical nature of economic theories but then suggests why the Doha round collapsed and why a lot of citizens – and their representatives here in the US of A – are not too upset:

Let's be clear: It is not the protectionists of the AFL-CIO or CNN who are primarily to blame for the erosion of public support for (global) trade in the United States , as bone-headed as they may be. The blame lies squarely with a business community that continues to support Republican politicians who refuse to raise the taxes and spend the money necessary to provide the economic safety net for American workers that a free-market economy has not, and will not, provide.

He goes on to point out that the failings of the “free market” are not failings of the market per se but rather failings of Agencies (the governance structure) to provide a framework in which a market economy can work efficiently and effectively. In a few paragraphs he nails the problems in the health-care industry, in the deregulated energy markets, and in housing.

Pearlstein does not mention the Mobility and Access Crisis, crumbling infrastructure or even the deregulated airlines (See “The End of Flight as We have Known It”) but those areas would provide examples that reinforced his thesis. 

What Paul Hawken calls “market fundamentalism” does not work because it relies on markets to do things that markets cannot do.

As Robert Reich points out in Supercapitalism, if managers tried to provide the economic safety nets, stockholders would – and should – sue them and take away their golden parachutes for pretending to be Enterprise "statesmen” exercising “corporate social responsibility.”  Managers cannot be philanthropists on someone else’s dime. That is not what capitalism is all about. 

Greg Anrig brings this observation into the current election cycle in a 3 August WaPo op ed, "Dead Right: McCain's Problem Isn't His Tactics. It's GOP (The Elephant Clan) Ideas."

Lets go back to housing and the cause and effect of the continuing meltdown. This is a topic of debate recently at Bacon’s Rebellion Blog. See “Land Use and the International Financial Crisis.”

There is a financial / market “fundamental” that has changed the basic economic reality in the US of A and is now having global impact. In fact it is the “The Big Fundamental, Fundamental.”

For the last 63 years Enterprises, Agencies and Institutions have been creating projects, programs, policies, regulations and incentives that result in dysfunctional human settlement patterns. 

The Mobility and Access Crisis, the Affordable and Accessible Housing Crisis and the Helter Skelter Crisis are all direct results of the increasingly dysfunctional distribution of human activity in the US of A. Dysfunctional settlement patterns impact not just Mobility and Access, Affordable and Accessible Housing directly but also indirectly they impact the level of Agency and private debt, the balance of payments, energy independence, food security, etc.

For some insight into the issue, one might turn to the aforementioned Robert J. Samuelson. Also in the 30 July WaPo Samuelson held forth on “The Homeownership Obsession." Samuelson’s bottom line is that “the centerpiece of the American dream is not for everyone.” 

We ask over and over why is the federal government with a $485 billion + / - deficit this year subsidizing – to the tune of $145 billion dollars in 2008 – the wrong size house in the wrong location?

If you figure in the borrowings from Social Security, the housing solution and other "details," the real deficit may be close to $825 billion, or twice what the current administration admits.

Bailing out Fanny and Freddie makes the market fundamentalist cringe – but then Fanny and Freddie were and are run by buddies. When the buddies get done at Fanny and Freddie they get new jobs -- Small ruining the Smithsonian or Rains helping Steve Case provide exotic Services for those at the top of the Ziggurat. But that is another story.

We have argued for years that the “problem” with Fanny and Freddie is not the excessive compensation, the sloppy accounting or the investments in sub-prime loans per se.  The problem is that both Enterprises have enabled and leveraged dysfunctional human settlement patterns – specifically, the wrong size house in the wrong location.

Unlike FHA / VA, Fanny and Freddie never established performance criteria. Increasing the percentage of home ownership was never enough as Samuelson makes very clear. The cumulative impact has been to give Business As Usual a way to pass off loans that do more harm than good to the loan recipient and to the larger community. 

The sub-prime loans are in fact not as detrimental as the cumulative locational impact of all the subsidized loans.  The wrong size house in the wrong location is the Big Bubble behind the current housing bubble and it was behind the four REIT, S&L, Gas and Oil recessions since World War II.  

Stop the speculation and flipping.  

Here is an idea for intelligent government action: Apply the tax break subsidies for home ownership to just the first dwelling a Household buys.

Increase the stability of Dooryards, Clusters and Neighborhoods by making it worthwhile for a homeowner to invest time and effort in the place they live rather than flipping and running. (See “Wild Abandonment,” 8 September 2003 .)

Those who say that recessions hurt those at the bottom of the food chain -- the bottom of the economic, social and physical Ziggurat – are absolutely right. But note what happened to the Wealth Gap during the depression per the graphic in our column of 7 July ("The Wealth Gap").

It was folks like my Grandfather who sold out to General Motors and became a speculator/mansion-building mogul who lost the most. Yes, my parents suffered – they never got a dime from "The Old Gent" because they were married after the crash, and what was left went to a second wife – but they survived and they provided a great start for my life.

As we suggest in three recent columns ("Good News, Bad Reporting," 24 March 2008; “Riding the Tiger,” 2 June and “The Wealth Gap,” 7 July, we challenge the whole idea of needing "growth" or any calculation of "recessions" for citizens to be happy and safe.

A comprehensive, intelligently planned and widely supported reduction in consumption can result in a sustainable trajectory for civilization.

 

A continuation of the current trends will yield a drastic crash. The crash will come in this cycle or not long from now when there are even fewer resources with which to build a better world.

The problem is that everyone from the Wall Street Journal to Warrenton Lifestyle (yes there is such a publication) is talking about this as just another “business cycle” and speculating how long the trough will last be before we are all rolling in clover again.

Without a “New Metric for Citizen Well Being” (10 December 2006), and a strategy to get there, the future looks bleak.

-- August 4, 2008

Ed Risse and his wife Linda live inside the "Clear Edge" of the "urban enclave" known as Warrenton, a municipality in the Countryside near the edge of the Washington-Baltimore "New Urban Region."

Mr. Risse, the principal of

SYNERGY/Planning, Inc., can be contacted at spirisse@aol.com.

Read his profile here.