Monday, July 2, 2012

Rio + 20 part 6 (the final one): The most important result the day the summit ended, Germany beat Greece 4-2.

            I was busy on June 22, trying to find out as much information as possible on the results of the summit, not so much because I expected a great result to come in the last minute, but simply because I made a decision months ago to do my best to bring the flaws of this summit to people’s attention..  When I started writing this monthly series on the summit in February, I stated clearly that I expect nothing more from it, than to expose humanity’s failure to address global problems, which increasingly matter since we live in a “global village”.  As I got really busy with researching the outcome of the event, I missed an opportunity to see a great soccer game unfold, which unlike the summit, did produce a result that was to my liking (hope Greek readers will not be offended, but I am a Germany fan).  I only managed to catch the final five minutes of this Euro 2012 quarterfinal.  One thing that I did realize as the game ended was that there was someone out there with a lot more common sense than I had.  As the celebrations of the German victory got underway, there was German Chancellor Angela Merkel, live in the stadium, celebrating.  Once again, she demonstrated her wisdom.

            Many people will jump to reproach her for being at the soccer game in Poland, rather than in Rio, but not I.  I believe she was absolutely right not to go.  If she would have gone, it would have made absolutely no difference.  There was never any hope of a meaningful agreement.  If she would have gone, she would have had a chance to listen to Bolivian president Evo Morales denounce any attempt to push for an agreement that would have involved a process of verification of environmental behavior.  He called it a new type of colonialism imposed on poor countries by the rich.  She could have also listened to the Indian and other delegations state that if there is to be any binding commitment for combating greenhouse gasses and sustainability, the “rich” countries should pick up the tab, even though they are not so rich anymore.  If I was the leader of Germany, I would not want to sit through that either.  Germany has one of the best records on doing its share on the environment in the past few decades.  It was all in vain however, because since the first summit two decades ago, China increased its greenhouse gas emissions by the equivalent of about three Germanys.  So needless to say that the economic sacrifice that Germany and others accepted voluntarily after the last summit, was an exercise in futility.

A beautiful mind: (prisoner dilemma)

            Aside from the fact that the flavor of the summit was such that it is no longer in line with present day realities, such as the fact that I already mentioned that the so called “rich” countries are no longer so rich anymore, nor is the effect of unilateral sacrifice effective in any way, given the diminished role we play in the global economy, there were many other flaws with this summit, which made it not worth anyone’s time and effort to show up.  There was nothing on the table to reflect basic economic fact and theory.  Everything proposed depended on goodwill and self sacrifice for the greater good.  There will be few if any who will want to sign up for that, and basic economic theory tells us that it is the case.

            Most of us know about famous mathematician John Nash from the movie, “A beautiful mind”, which recounts his life.  In the field of economics he is known for a simple and straightforward mathematical assumption which is used to predict human behavior in relation to economic matters (The Nash Equilibrium).  His game theory, tells us about the “prisoner dilemma”.  It is an assumption that given two partners in crime being interrogated, the expectation should be that they will both collaborate, even though both not collaborating will benefit them more.  Reason is that each one of them will assume that the other one is spilling the beans in the other room, so cutting a deal that minimizes the punishment is a superior choice to not collaborating and thus facing the full weight of prosecution.

do not cooperate
do not cooperate

The numbers above represent years of prison time.  Each one has a choice between combinations 5, 0, or 0, 3.  In a Nash equilibrium situation, the 0, 3 is the logical one to pick for both prisoners.    

As we can see, from the diagram, the obvious superior choice for both suspects being interrogated is to try to cut a deal, by turning in the other partner in crime in.  Any other choice is illogical from an individual’s perspective, even though they could both benefit greatly by not cutting a deal, as the diagram shows, because they could both potentially walk free.

            The reason I brought this up is because in effect the Kyoto accord, as well as all other proposals that were on the table at this year’s summit had the flaw of parties gaining an advantage by not signing on, especially so, if other competitors do sign on to a deal.  So signing on to the deal went against the principle of the Nash equilibrium, therefore the expectation is that for those signing up, it was a losing proposition.  If we look at the effect this illogical move had on Europe’s economy, the Nash equilibrium theory has been proven to be correct.  Europe’s self sacrifice did not produce any positive results as I have shown in my March article on the summit, while the economic damage has been great, even though understated by official accounts.  The obvious benefactors were the ones who did not sign up, thus why would they sign on twenty years later?

The greatest tragedy:

            The summit itself may have been flawed and doomed to failure before it had a chance to get started, but that by itself is not the great tragedy in my view, event though I described this as humanity’s greatest failure, given our urgent need for adopting a global path for a more sustainable future.  The great tragedy is the culture of the environmental and human rights and dignity crusaders, which is deeply flawed and doomed to perpetual failure, unless they can find the maturity to abandon their childish idealism and political ideology and grow into a more pragmatic and reality respecting movement.  In the aftermath of the summit, I detected little evidence that this failure would trigger some inner soul searching.  The most common reaction to this failure has been to invoke claims that the summit actually succeeded, because some companies made a few pledges to look for ways to align their primary mission to maximize profit with the need to be environmentally conscious, and because the 50,000 or so participants at the summit, will now be energized to go back to their communities and make a difference in various ways.

            The ones, who admitted failure, took a first step in the right direction by doing so, and then they went ahead and ruined it by turning off the right path.  They are busy blaming the rich countries, or the poor countries.  They will blame the political right, or the corporations.  They blame the current financial crisis for diminishing appetite for action.  The one thing they do not blame, is the thing that is most responsible for failure.  At the original Rio summit as well as at this one, there were no viable proposals on the table, such as something that would pass a simple test of whether it would meet the requirements of the Nash equilibrium or not.  Two decades ago, the summit managed to find a few gullible actors to sign on to these flawed proposals, but they learned since then the hard way.  The ones who did not learn, are the ones who came up with these flawed proposals, and their supporters.  There is therefore little chance of ever getting a viable solution on the table.

What is next?

The first symptoms of our unsustainable path are here, and they are unmistakable.  Food prices rose by 150% in the last decade or so, according to UN stats.  Oil prices rose by about 500% during the same period.  Many other commodities are charting a more or less similar path.  Prices have moderated somewhat in the past half decade or so, thanks to the weak global recovery we are witnessing following the 2008 crash.  Any hint of robust recovery has been accompanied by equally robust increases in many vital commodity prices, causing the fragile recovery to stall out.  We have seen this process play out twice already in the past half decade, where oil prices spiked every time we got a little bit of positive data on the economy in 2011 and 2012.  In both cases, prices came down only after the damage was done, and demand once again weakened. It is clear therefore that the only way forward from here is one that includes a mechanism that will allow us to get more benefit, out of less.  The market does not do that, because the price signals it depends on create a reactionary response to this problem, while we need a proactive response that avoids the need of the market to react, since in every instance the market’s main reaction has been to depress the economy in order to depress demand for the spiking commodities.  Sadly, the longer we will beat our head against these constraints, we will become weaker and more tired, and therefore less able to solve the sustainability problem, which will continue to drain us, for as long as we continue to fail to acknowledge and deal with it.

The cultural and political scene will not help either.  It would take nothing less than a book to explain to the average individual the connection between sustainability and growth from this point on.  The average individual is most likely to be moved by short slogans, no longer than a sentence or two, so needless to say that it is impossible to make people aware of the fact that the true reason society is falling apart is because we are unable to coordinate a global effort to get more out of limited and in some cases diminishing resources.  People will continue to believe that the choice remains between growth and the environment, when in fact the choice is the same.  We will either continue as we do, gradually losing the ability to provide to more and more people, or we will save both the economy and the environment by fighting to implement something bold and effective, such as the sustainability trade tariff I’ve been advocating.  Time is running out for us to attempt such a solution, because as the western countries continue to be stuck in stagnation mode or worse, our global weight is shrinking fast, and I just don’t see the next generation of global powers such as China taking the lead on this.

What to expect:

            To borrow a title from a Howard Kunstler book, this is indeed a long emergency.  Like I said from the beginning, the failure of the summit might be humanity’s greatest disaster, but most will not realize that this is the root of the problems that lie ahead.  We will get too busy dealing with the symptoms rather than solving the problem itself.  The market and human ingenuity will provide years of respite from the pain, for as long as we will still have spare resources to act.  At some point however we will become too drained, while the fixes will most often be only temporary acts that will serve to buy time.  Depending on political decisions and other factors, we could be looking at a crisis that in hindsight humanity will measure it as something that started in 2008, and ended in a complete failure three or four decades later.

            Throughout it all, there will be some countries and regions that will do better than others.  Economics is a lot about momentum, and at this point the western world, as well as many poor, dysfunctional states have no momentum.  On the other hand there are many developing countries that do have a lot of momentum, therefore greater potential to power through with less suffering.  We have seen this with the recent rise in commodity prices already, where countries such as China were better able to cope.

            For western society, at stake is survival.  We are already faced with brutal demographic issues.  The recent economic downturn has exacerbated the situation, because young people have been hit hard, and since many cannot find a way to earn a living, they will not start a family.  The canary in the mine in this case will be states at the edge of the western world, such as EU members Romania and Bulgaria.  In their case, a high outflow of young people looking to improve their lives is accelerating the process.  These states could provide for an example that the western world has not seen in its history, which is a complete collapse of a state due to demographic issues.  At some point, there will be too many dependents per worker to continue making it work.  Other western countries have the benefit of an inflow of migrants, but at some point, if the flow gets too heavy, then it becomes population and cultural replacement, rather than replenishment.  A recent study out of Vancouver, that now has an Asian majority, is proof of the fact that Vancouver no longer has a Canadian society, but rather a Chinese, East Indian and other Asian societies[i].  This is already the case, even though Asians actually only have a slim majority, and it is not by any means a majority formed by one ethnic entity.

            Aside from the demographic problem, there is the economic problem, which is a grave one, because we need more momentum to keep from choking on our debt, but momentum is hard to come by.  We also have a cultural and structural problem.  We are by no means used to harsh times, and our cultural norms prevent us from adapting.  For instance, there is an increasing trend of young people moving back to their parents place, but unlike other societies we are not used to forming multi-generational family homes, even though in many cases the houses are big enough to accommodate.  Our entire infrastructure is built and designed for times of plenty.  Those times are slowly but surely ending.

            All of this could be avoided.  The first step is for those who are aware of the need of a sustainable future to grow up, and see the flaws of their ideology.  Then perhaps we can finally win the political argument for taking action, since we would have a viable argument for a change.

            This is my final monthly article covering the run-up and the summit itself.  I hope I managed to help a few people see things from a slightly different perspective.  I don’t hold much hope for changing the greater situation, but the fact that my Rio articles had almost a thousand visits, means that it is more than I could have done through any other means at my disposal, even if only a small fraction of those who read at least one of the articles came away with a slightly changed view.  Even though the great summit has ended, I will continue to try to fight for a viable mechanism for global sustainability.  I think it is the responsibility of all to try to do this for our children, and humanity’s sake.

            I want to thank those who took an interest in my articles or even my book.  The volume of interest may not qualify as a great success story, but it has so far exceeded my expectations.  I hope people will continue to find my work interesting and worth their time.

Study found increasing barriers between ethnic societies, which in essence means loss of cohesion.  One has to think about these findings in a way that relates it to how our society functions.  For instance, as much as 9 out of 10 jobs are landed through “networking”, which is a nice way of saying nepotism.  Since in the Vancouver case, there is a growing rift between ethnic groups living there, it can in effect in time lead to an ethnic based caste society.

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