[Pen-l] Re: [Marxism] water and energy

[Patrick Bond <pbond@xxxxxxxxxxx>]

michael perelman wrote:
> Finding a solution to the energy problem will not be easy.  Water is an 
> even more challenging problem.  In my Hainan talk, I mentioned the 
> tension between water and power. Here is another article on the subject, 
> noting the tension between water and solar energy.
>
> http://michaelperelman.files.wordpress.com/2009/04/hainan1.pdf

A great article. A shame you put us through the tedium of the download, 
comrade Michael:

1
An Ecological Future: Marx and Wu-Wei
Ecology
China is a land of great contradictions for me -- over and beyond the
market contradictions that Marx identified. Admittedly, some of these
contradictions might be illusory because of my superficial knowledge of
the country.
Last January, I had the privilege of visiting the Humble
Administrator's garden in Suzhou. I was struck by the enormous amount
of workers he must have commanded to reshape nature so completely. The
Grand Canal represents an even more massive mobilization. At the same
time, nature can rebel against efforts to control it, such as when the
excessive weight of water held behind a dam sets off a devastating
earthquake.
Almost four decades ago when U.S. visitors first began to visit China
after the revolution, they reported the fantastic yields made possible
by traditional Chinese polyculture. Of course, these farmers' great
achievements went for naught, in the sense that many people still remained
impoverished. At the same time, I realized that historically the lack
of sanitary facilities associated with this system of agriculture led
to a devastating epidemic of intestinal worms, which made the challenge
of feeding so many people even more difficult.
An American Missionary, Gerald Freeman Winfield, described the extent
of the problem as it existed in pre-revolutionary China. Based on a survey
of the prevalence of one intestinal parasite, Ascaris -- not even the
most dangerous parasite -- he estimated:
2
If all these worms were strung together they would form a worm
1,221,000 miles long-long enough to wrap around the equator
almost fifty times. In total they would weigh 130,900 tons,
or equal in weight about two million adult Chinese. [Winfield
1950, p. 129]
Later, I came to understand that even with better sanitation, bunching
too many life forms together -- producing rice, fish, pigs, and fowl in
a confined space, without sufficient protections -- still provides an
ideal habitat for life-threatening organisms, such as those which caused
the outbreak of SARS.
Obviously, regional contradictions abound in a country as extensive
as China. About two decades ago, I read about the periodic famines that
swept across Northern China.
During the 1920s, U.S. scientists reported back on the difficulty
of supporting so many people with traditional methods on infertile land.
Walter Clay Lowdermilk, a forester who was the most insightful of these
visiting scientists, found beautiful forests surrounding temples in North
China, but the rest of the hills were denuded of trees. Poor peasants
with too little a margin of survival had little choice but to farm the
hillsides. Over the centuries, erosion left the land infertile. The
rains were strong enough to cause flooding and erosion, causing the water
to rush too quickly to replenish the earth. Lowdermilk's message was
the importance of protecting the soil, but the soil and water are only
part of a complex web of life.
The shortage of water in the North and Northwest -- made worse by
3
the loss of the protective cover from the land, especially on the steepest
land -- accounted for much of the difference between the poor yields there
and bountiful production of the rice lands. Yet, China has an ancient
history of engineering water.
Today, another factor affects the interplay between soil and
water -- energy. The connection with energy is most obvious in
hydroelectric projects, but it affects virtually all aspects of energy
production. In my country, almost half of water withdrawals go for the
production of electricity by turning water into steam. At the same time,
natural gas producers inject huge quantities of water into the ground
to extract the fuel. Even worse, is the wasteful practice of turning
gooey oil sands into usable petroleum, while thoroughly polluting the
enormous quantities water used in the process.
Although fresh water is more scarce than petroleum, it gets far less
attention. Moving from the macro scale of energy production to the small
scale of a polycultured rice paddy increases the complexity of
understanding the environmental impacts of technologies. Of course, the
overriding challenge of global warming dramatically underscores the
interaction of energy use and water, in part, because the oceans have
provided a sink for carbon dioxide.
The ultimate question that these visiting scientists raised is still
relevant. How can one learn to create a bountiful life without disrupting
the natural systems upon which we ultimately depend?
Economics
The ongoing crisis in the world economy signals the bankruptcy of
4
traditional economics. The ongoing environmental destruction should be
equally damning, but many people still think that markets offer some sort
of environmental answer. At the same time, after many decades of ridicule,
Marx's economics are now commanding more attention.
Since this conference is intended to address environmental
challenges, I will pass over Marx's powerful analysis of economic crises
after this brief acknowledgment of its importance for understanding the
current economic mess. Let me mention two glaring failures of economics
in so far as the environment is concerned. The first concerns the idea
of discounting; the second is less obvious, but increasingly important.
By discounting, economists mean that the value of an asset one year
in the future is worth only a fraction as much as it is today. Economists
treat the discounted value n-years into the future as the current value
multiplied by that same fraction n-times. Since economists often use
the same discounting fraction that business uses, consequences a year
from now are only 80 or 90 percent as important as an immediate effect.
These discounted values fall off quickly, leaving problems a few decades
in the future to sink into insignificance.
The second problem deals with the earlier discussion of ecology.
Economics frames everything as a price, but price formation collapses
everything into a crude measure that takes no account of the complex
interactions suggested by the earlier discussion of agriculture. A
complete list of the complex interactions that modern ecologists have
discovered would fill volumes, but they have only scratched the surface.
This problem compounds the first defect of ignoring either the gradual
5
accumulation of environmental damage or the buildup of pressures that
suddenly create a catastrophe.
Value Theory and Reproduction
While the discounting of conventional economics expresses a disregard
for the future, Marx's value theory implies a sensitivity to environmental
concerns. I am not thinking of the textbook value theory that simply
adds up the labor embodied in a commodity, but a richer kind of value
theory usually attributed to Marx -- but a fuller value theory that Marx
never had time to flesh out.
Marx taught that a proper theory of value must reflect reproduction
costs rather than just the immediate production costs. This insight about
reproduction costs has two divergent implications, which are important
for understanding both capital and capitalism.
Considerations of reproduction costs complicate Marx's theory of
value, but they also enrich it. In addition, reproduction costs also
open up a sharp critique of capitalism. At the time of an investment,
nobody can know the future. For example, business has no way of
anticipating when future technology will make a new capital good obsolete.
The declines in reproduction costs are especially severe during
periods of rapid technological change. This phenomenon was abundantly
clear during the early decades of the personal computer, when each new
generation of computers would start out with a price something like
$10,000, then decline relatively rapidly until it approached $1,000, at
which time a new generation would appear. While the price declines were
relatively predictable, the timing was not.
6
Marx explored this phenomenon in discussing the work of Charles
Babbage. Babbage, who, like Isaac Newton, was a Lucasian professor of
mathematics at Cambridge, attempted to construct the first computer in
the early nineteenth century, more than a century before the first working
computer appeared. Of course, Babbage's computer was based on mechanical
power rather than electronics, but it still required parts with very
precise specifications. In carrying out his project, Babbage had to work
with many workshops, teaching him a great deal about modern manufacturing.
Based on this experience, Babbage published an extraordinary book,
The Economy of Machinery and Manufactures, which went well beyond any
contemporary work of political economy in creating a realistic analysis
of modern production. The significance of rapid technical change struck
Babbage, who claimed:
... improvements succeeded each other so rapidly that machines
which had never been finished were abandoned in the hands of
their makers, because new improvements had superseded their
utility. Babbage 1835, p. 286]
Babbage's rule of thumb was that the cost of an original machine was roughly
five times the cost of a duplicate (Babbage 1835, p. 266). He used the
example of frames for making patent net that initially sold for twelve
hundred pounds. A few years later, they cost only sixty pounds (Marx
1977, p. 528; Babbage 1835, p. 286 and 214). According to Babbage's
estimates, in terms of value theory, one hour of labor embodied in patent
nets that were only a few years old would be equivalent to three minutes
of direct labor embodied in a new machine.
7
Reproduction Costs and the Environment
Reproduction costs have important environmental implications. While the
monetary costs of reproduction may fall, environmental costs increase
over time. These rising environmental costs may well swamp the apparent
efficiencies that struck Babbage and Marx.
At the same time, new technology for extracting resources may be
able to obscure the danger of impending scarcities, because rapidly rising,
but unpriced, future reproduction costs go unnoticed.
Marx's observation warns that looking at the exploitation of
resources only in terms of immediate production costs is ridiculous.
In this sense, Marx's theory is more environmentally advanced than
conventional economics.
Imagine a person walking into an automobile dealership, offering
to pay the cost of extracting the automobile from the premises -- maybe
$.10 worth of gasoline plus a nickel, representing a fifty percent markup.
Nobody would take such an offer seriously, yet the market prices resource
extraction in a similar fashion.
Markets, of course, are supposed to signal when resources are becoming
scarce, so that people take measures to economize. In the United States,
there was a bird known as the passenger pigeon, which was so numerous
that flocks would actually block out the sun. Hunters would fill large
wagons with the birds. They had a ready market for their produce because
the bird tasted like chicken, making pigeon prices similar to those of
chickens. Because of this relatively tight relationship, the price of
these birds stayed relatively constant right up to the time that they
8
became extinct (Perelman 2003, pp. 67-77).
In the case of the passenger pigeons, the warning from the price
system was nonexistent. Of course, the world has survived without
passenger pigeons, but fossil fuels and water, which are central to our
lives, must be treated with considerably more care. Markets that rely
on simple production prices blind society to future dangers.
Ironically, Marx's value theory is often wrongly dismissed for having
neglected natural resources. For example, in a widely circulated article,
Paul Samuelson charged Marx with ignoring "the patent fact that natural
resources, too, are productive" (Samuelson 1957, p. 894). However, with
his concept of reproduction costs, Marx offered a framework well in advance
of contemporary economics. The wanton depletion and degradation of
resources should be taken into account in evaluating economic activities,
even though the price system pays no attention to such matters.
Reproduction Costs and Technology
Taking account of reproduction costs also throws light on another problem
with the presumed efficiency of market-oriented investment. The economic
history of the later part of the nineteenth century, when industry was
first learning to harness the power of fossil fuels, illustrates this
phenomenon. At the time, rapid devalorization of capital, which would
have been familiar to Babbage, was sweeping across the U.S. economy.
For example, not long after Marx wrote, the American steel magnate, Andrew
Carnegie, upon hearing about a superior design for a rolling mill ordered
his young assistant, Charles Schwab, to raze and reconstruct an existing
three-month-old mill (Livesay 2000, p. 130).
9
Unlike the 20th century economist, Joseph Schumpeter, who wrote about
creative destruction (Schumpeter 1950), Babbage emphasized what might
be called destructive creativity. What could destructive creativity
mean?
In a laissez-faire economy, profits become impossible when the
sequence of technical change becomes too rapid. As the Carnegie example
shows, when the pace of technological change reaches a threshold,
capitalists may not be able to operate their stock long enough to recoup
their initial outlays. Such capital destruction became so widespread
in the late 19th century United States that the economy experienced a
prolonged crisis, even though the output was growing at the time.
The response of business was to organize trusts and cartels to limit
the competition -- in effect to abandon capitalism. In this new
environment, business had little need to invest in new technologies.
This episode illustrates how capitalist production tends to slow down
the rate of technical change (Perelman 2006). Over time, the effect of
this technological slowdown becomes obvious. The lost dominance of the
U.S. automobile industry offers a convenient example of this phenomenon.
Simultaneously, during times of rapid technological change, the lure
of great profits makes investors more likely to foolishly rush into
projects that promise very fast payoffs. For example, in the late 1990s,
extravagant predictions about the Internet led business to overinvest.
In two years, business companies spent an estimated $35 billion to lay
an estimated 100 million miles of optical fiber -- more than enough to
reach the sun.
10
After this flurry of investment, only about 2.6 percent of the
capacity was actually being used (Romero 2001; Blumentstein 2001). By
the time the demand increases enough to require this much optical cable,
the technology embodied in this investment may well be obsolete. This
overinvestment in Internet-connected ventures eventually led to the
dot.com bust and set the stage for the later crisis, which was incorrectly
explained as a housing crisis.
The complication of reproduction costs throws all claims of market
efficiency into question and suggests the need for regulation to prevent
the irrational use of scarce resources. In addition, disregard for
reproduction costs can misdirect investment, as well as the technological
and scientific efforts required to meet social needs. More specifically,
capitalism is unable to rise to the challenge of creating an adequate
response to the global environmental crisis.
Value Theory and Capitalist Control
Marx began with the obvious recognition that capitalist production crudely
relies on "sweating" labor; that is, driving workers as intensively as
possible. Given his insights into reproduction costs, Marx could not
help but recognize how labor-saving technology was already dramatically
reducing the direct labor embodied in commodities in the mid-nineteenth
century.
Conventional economic theory teaches that as the wage share of total
costs falls, the rationalization for concentrating on labor costs
diminishes. Yet business still tends to emphasize cutting labor costs.
For example, Michael Piore's survey of 60 New England factories found
11
that employers instructed engineers to single-mindedly pursue the goal
of developing methods of reducing labor inputs, without regard for the
more rational criterion of overall cost minimization. He went on to say:
Virtually without exception, the engineers distrusted hourly
labor and admitted a tendency to substitute capital whenever
they had the discretion to do so. As one engineer explained,
"if the cost comparison favored labor but we were close, I would
mechanize anyway." [Piore 1968, p. 610]
Piore's quote suggests a side of the class struggle that usually passes
unnoticed, unless one recognizes capital as a social relation. In effect,
Piore's survey revealed that capitalists' urge to control labor is so
strong that they ignore opportunities that might be both profitable and
socially beneficial.
Marx explored the irrationality of this obsessive concentration on
the minimization of labor costs. He noted an effect of modern technology
that went beyond the reduction in direct labor. He observed that modern
technology required a new kind of labor. Remember that this insight came
a century before economists began to prattle about the information economy.
In particular, Marx observed that in a rational economy, the modern
worker:
... steps to the side of the production process instead of being
its chief actor. In this transformation, it is neither the direct
human labour he himself performs, nor the time during which
he works, but rather the appropriation of his own general
productive power, his understanding of nature and his mastery
12
over it by virtue of his presence as a social body -- it is,
in a word, the development of the social individual which appears
as the great foundation-stone of production and of wealth. The
theft of alien labour time, on which the present wealth is based,
appears a miserable foundation in face of this new one, created
by large-scale industry itself. As soon as labour in the direct
form has ceased to be the great well-spring of wealth, labour
time ceases and must cease to be its measure, and hence exchange
value [must cease to be the measure] of use value. [Marx 1973,
p. 705]
Marx went deeper into this glaring contradiction between the emphasis
on the minimization of labor costs and the nature of modern technology,
which concentrates on the minimization of the role of direct labor in
production. He explained that:
... to the degree that large industry develops, the creation
of real wealth comes to depend less on labour time and on the
amount of labour employed than on the power of the agencies
set in motion during labour time, whose 'powerful effectiveness'
is itself in turn out of all proportion to the direct labour
time spent on their production, but depends rather on the general
state of science and on the progress of technology, or the
application of this science to production. [Marx 1973, pp.
704-5]
An apocryphal story about Henry Ford, an inveterate driver of labor,
illustrates Marx's point. An efficiency expert, accompanying Ford on
13
a walk through one of his factories, pointed to a man sitting with his
feet on a desk, apparently doing nothing. The expert quickly identified
the waste associated with the idling man. Ford, however, disagreed with
this appraisal, explaining that a single idea that the man proposed last
year saved the company $1 million.
Some people might misread Marx's observation about the declining
quantitative importance of direct labor to mean that Marx's theory is
invalid for a modern economy -- if, by a modern economy, we mean the economy
that exists today. Of course, unlike academic economics, Marx was
analyzing the way the economy actually works, not the way it should ideally
function. Value reflects a major operating principle of a flawed system.
Of course, the problem does not lay in his theory of value, but rather
with the subject that value theory describes. Marx realized that the
social relations of capital do not just override the logic of
profit-maximization. They stand in the way of developing an organization
of society that can best utilize and take care of its resources.
People and Technology
Technology is, of course, part of the solution to the environmental crisis.
Any adequate solution will require a different kind of technology, not
one dedicated to the short-run profits of an exclusive group who have
control of capital. Nor can this technology be nothing more than a crude
attempt to blast wealth from the earth. It must be directed toward a
more harmonious relationship with the environment.
This technology will not fall from the sky; instead, it must engage
the enthusiasm as well as the intellects of the masses. Our challenges
14
are too extreme to think that a small group of technocrats with their
feet on their desks could come up with adequate answers on their own.
Presently, people are calling upon technology to eliminate waste,
but the greatest waste is human potential. Society must find a way to
spread education as widely as possible, while encouraging all people to
get involved in making the world a better place. In the United States,
class and race have detrimental effects on educational opportunities.
I understand that China may be moving in the right direction now that
the country is deciding whether to increase the years of compulsory
schooling.
Education means more than just filling students with book learning.
Proper education will help students discover new interests and foster
talents of which students were unaware.
Formal education, by itself, no matter how enlightened, is
insufficient to meet the current needs. People must be given the
opportunity and the encouragement to fully develop their own potential
at all stages of their life, on and off the job. The kind of investment
Piore found, biased toward the control of labor, has no place in a rational
world. Instead, Marx's vision of workers combining labor and science
must become a reality. Workplaces would offer opportunities for
"idling" -- times at which workers could be learning as well as teaching
others.
A rational system would also be willing to pay attention to
traditional methods of production, such as the ancient Chinese
agricultural practices, while avoiding the errors associated with such
15
techniques. Although such traditional producers may not have a full
understanding of their environment, they also are a reservoir of valuable
information that has so far eluded scientific ecologists.
The time has come to turn away from the destructive capitalist
practices -- to nurture both people and nature -- to learn from Marx,
learn from nature, and learn from the people.
Marx and Wu-Wei
I understand that the early eighteenth century French Physiocratic School
of economics took their inspiration for their laissez faire theory from
the ancient doctrine of Wu-Wei. To their credit, the Physiocrats did
have an environmental gloss because these economists followed the French
tradition of emphasizing agriculture. In fact, the name that the
Physiocrats took for themselves meant the rule of nature. When Adam Smith
appropriated much of the Physiocratic doctrine, he explicitly cast aside
the French emphasis on nature. Instead, he set the tone for his work
by plagiarizing a couple of French articles describing the crude
manufacture of pins. For the most part, Smith's legacy continues to this
day.
I have trouble believing that the Chinese Taoists intended to propose
anything as naive as modern economics. The idea that merely limiting
government activity would lead either to prosperity or to freedom is a
purely European invention.
Perhaps, however, Wu-Wei's idea of effortless action might be more
easily reconciled with the ideas of Karl Marx than with a society in which
people are expected to cede power to unelected capitalists.
16
In a Marxist Wowed world, workers would learn about science while
scientists would learn about work. One man would not be "idling" while
hundreds of other workers are toiling. Instead, all workers would be both
"idling" and toiling.
The introduction of labor-saving technology has certainly not done
much to promote idling, except for the unemployed. For example, people
in the United States work longer than in other advanced countries. In
the United States between 1970 and 2002, per capita annual hours of work
rose 20 percent, while falling in most other advanced economies, perhaps
because a stronger labor movement has been able to slightly moderate market
forces (Organization for Economic Co-operation and Development 2004, p.
6).
Although conventional economics recognizes the importance of
education and training, it refers to workers' acquisition of knowledge
and experience as human capital, as if what is most human can be reduced
to something comparable to an inanimate object.
In my new book manuscript, The Invisible Handcuffs of Capitalism:
How Market Tyranny Stifles the Economy by Stunting Workers, I go into
detail about how the current economic system prevents people from
developing the kind of capacities that would enhance the scientific
approach to production that Marx was describing.
The book also describes the lengths to which economists have gone
to make this deficiency invisible by framing economics around
transactions, putting aside all matters of work, workers, and working
conditions. Finally, this manuscript explores the way that capitalist
17
performance will continue to fall behind the technical capacity of society
because of this inability to take advantage of human potential.
References
Blumenstein, Rebecca. 2001. "The Path to the U.S. Fiber Cable Glut." Wall
Street Journal (18 June).
Marx, Karl. 1974. Grundrisse (New York: Vintage).
Organisation for Economic Co-operation and Development. 2004. Clocking
In and Clocking Out: OECD Policy Brief (October).
<http://www.oecd.org/dataoecd/42/49/33821328.pdf>
Perelman, Michael. 2003. The Perverse Economy: The Impact of Markets on
People and Nature (New York: Palgrave).
___. 2006. Railroading Economics: The Creation of the Free Market Mythology
(New York: Monthly Review Press).
___. forthcoming. The Invisible Handcuffs of Capitalism: How Market
Tyranny Stifles the Economy by Stunting Workers.
Piore, Michael J. 1968. "The Impact of the Labor Market upon the Design
and Selection of Productive Techniques within the Manufacturing Plant."
Quarterly Journal of Economics, Vol. 82, No. 4 (November): pp. 602-20.
Romero, Simon. 2001. "Once-Bright Future of Optical Fiber Dims." New York
Times (18 June).
Schumpeter, Joseph A. 1950. Capitalism, Socialism and Democracy, 3rd.
ed. (New York: Harper & Row).
Winfield, Gerald Freeman. 1950. China, the Land and the People (New York:
W. Sloane Associates).
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