12092019What's Hot:

Make Orange Great Again: His Orangeness Promises Crumbs will Be Bigger This Year.

Neoliberals Happy with Crumbs Kiss Orangeness' Feet. Reformers Want a Bigger Share of the Pie. Revolutionaries Want to Toss Away the Pie and Start Over with a New Recipe.

Why Bernie Sanders Came Up Short—and How That Lesson Can Fuel Future Progressive Victories
Organizers believe his campaign shows a true political revolution is possible.

The following is an excerpt from the new book Rules for Revolutionaries by Becky Bond and Zack Exley (Chelsea Green, 2016):

Revolutions are messy, wonderful, maddening, and joyful all at once. They alternate between inspiring unbelievable elation and taking your heart and crushing it in a vise, sometimes both in the same day.

Revolutions rarely succeed immediately. But when they do achieve their ultimate goal—even when it seems sudden—it’s usually a result of years of accumulated confidence, new tactics, and momentum. All of this is gained through defeats and setbacks that train and galvanize an ever-growing base of people who believe that change is possible if they all stand up and fight for change together.

When Bernie called for a political revolution, his campaign was just taking its place as part of the process of bringing more people into the start of something big. Yes, we failed to win Bernie the Democratic nomination for president, even though we came excruciatingly close to doing so. But in the process, we demonstrated that a real political revolution is possible. A political revolution is something that we must grow together over the long haul. Our next step is to bring what we learned from the Bernie campaign along with all the new people that we met to the struggles you’re fighting right now in your own communities, campaigns, or organizations.

Bernie began the race fairly late in the game, with 3 percent name recognition, no money, and all kinds of baggage that pundits believed would disqualify him out of hand. By the time the Iowa primary came, Bernie was surging in the national polls. He went on to win twenty-two states and received an astonishing 46 percent of the pledged delegates for the nomination.

Rules for Revolutionaries is about a new set of practices and an orientation that helped make all of that possible—and we believe that it can be applied to other struggles that are part of building a political revolution to critical mass, including the ones you are fighting in right now.

On the Bernie campaign, in the later primary states where we worked, we began to unleash hundreds of thousands of volunteers to do meaningful and effective voter contact work. Even though we’re excited about the results we saw, and we believe that massive volunteer voter contact efforts must have contributed in some way to Bernie’s success, we know that the distributed organizing program barely scratched the surface of what Bernie’s supporters were capable of achieving.

One of our greatest failures was that we were not able to win enough trust from the campaign leadership and traditional field organization for the idea of volunteer-led organizing. We failed to secure key resources and authorizations that would have allowed us to build a massive and effectively targeted campaign. That would have included rolling out VAN, the campaign voter database, to all fifty states as early as July of 2015 and giving volunteers the ability to organize their own states well before paid staff would ever land on the ground there. We also could have allowed volunteers to crowdfund and open their own offices. And we could have developed a base of volunteer leaders who then could have formed the core of paid staff when the campaign was ready to start hiring in the later states.

The problem of scaling volunteer-led field programs and integrating volunteers with traditional paid field staff is one that we are confident will be solved. First, the Bernie campaign showed us what was possible and pioneered new ways of mass organizing to make it easier for the next insurgent candidate willing to run on a big message with big organizing behind it. Second, new overtime rules issued by the Obama administration in 2016 may guarantee that it happens sooner rather than later. Paid field organizers generally put in massive amounts of hours, far in excess of the forty-hour workweek, and they do this for low wages. Under the new overtime rules, any employee making less than roughly $ 60,000 a year will have to be paid overtime. The traditional system we have in place will become even less scalable as the expense of paid labor will far exceed what most issue advocacy groups or political campaigns can afford (or are willing) to pay.

The Bernie campaign inspired the greatest number of volunteers ever seen in a presidential primary. We built a massive volunteer voter contact machine that made over seventy-five million phone calls, sent over eight million peer-to-peer text messages, and held more than one hundred thousand volunteer-led events. It was a start but was nowhere near the massive wave of volunteer voter contact we could have launched had we gone all-in on a grassroots approach.

There’s a growing body of research that shows that television ads—the vast majority of spending in federal elections—have only a slight and fleeting impact on voters. While ads can be important in helping an unknown candidate get name recognition and thus become more viable, they have not been proven to have a substantial impact on voter turnout.

One of the things the campaign got wrong—and in some ways it’s hard to blame anyone because the conventional wisdom favoring massive ad spending seems blindingly ubiquitous—was spending so much money on ads and not shifting more money into organizing. The biggest single expenditure by far of the Bernie campaign, as it is in nearly every electoral campaign at the federal or statewide level, was advertising. Bernie spent more money on advertising than any other presidential candidate in the 2016 primaries. He spent more money than Hillary Clinton, more money than the Republican candidates, and certainly more money than Donald Trump, who could count the mainstream media as a virtual SuperPAC that kept him on the air practically 24/7. Meanwhile, Clinton spent more than twice as much money on staff than our campaign did.

What the volunteers knew all along was that the gold standard in any campaign for changing hearts and minds is a personal conversation between a volunteer and a voter at the door or on the phone. We don’t think of this as just as a missed opportunity—we see this as good news. The science on this continues to pile up on our side. Recent research confirms that deep, engaged conversations between volunteers and voters are not just effective in moving voters to the polls. They can change deeply held attitudes regarding controversial issues such as transgender rights, and those changed attitudes can endure over time. Person-to-person outreach can be used to turn out members to community meetings as well as to the polls, to build public support for racial justice, redistribution of wealth, climate action to achieve 100% energy independence, and other urgent causes. The nonprofit sector spends billions of dollars a year on advertising. Imagine if even just a healthy fraction of that was spent on volunteer-to-community or member-to-member outreach.

We don’t know the effect that the over $ 90 million the campaign spent on television advertising had in states we needed to win but lost. What we do know (and what volunteers have told us repeatedly) is that in almost every state, Bernie had far more than enough volunteers mobilized early enough to build the biggest, most effective voter contact program in history. No matter what our organizing challenge—whether it’s an election or a massive grassroots lobbying mission—we can change outcomes by investing early in building effective and massive person-to-person outreach campaigns. The Bernie campaign proved this was possible. Now we just need to go out and make it happen.

Imagine what would happen:

  • If a huge campaign for change that tackles all the issues, with race as part of the core message to everyone, is started early enough to allow for the lead time that’s required to set up an effective national grassroots organization.
  • If volunteer leaders—starting at the very beginning of the campaign, not the end—are given a clear and objective way to demonstrate contributions to a centralized plan to win and are empowered by access to top-notch voter contact tools and data.
  • If volunteer leaders are given the green light to run grassroots headquarters out of their homes and raise money to open public offices in their communities.
  • If mass organizing barnstorms are held as weekly volunteer activation sessions in every neighborhood in every state.
  • If there is a management system that allows proven volunteers to have a defined place in the organizational hierarchy, with the same oversight and accountability as staff.
  • If the massive scale of the organization and the ample lead time in each state allows the campaign to rely less on targeting and instead reach out to all the people, not just swing and base voters, but also unregistered voters, young people, and independents.
  • If the campaign becomes a truly national conversation about our collective fate—a conversation held on the porch or the telephone of virtually every American.
  • If tens of millions of dollars less are spent on television ads and instead those dollars are put into distributed organizing to unleash the power of the people.

So much is at stake. Every day we do not achieve radical change, we slide further toward a point of no return for our vulnerable world: wars of choice, climate change, structural racism, our out of control injustice system, poverty, addiction, the implosion of our health care system, and our inhumane immigration system. The status quo is killing people and dragging the world toward chaos.

It is with all of this on the line that we must take on the work of building and growing our political revolution. Revolutions are people’s movements. People’s movements are by nature big. With so many people involved and so much at stake, there’s inevitably chaos. And when you go breaking all the old rules—like we’re saying you should do!—it gets even more chaotic.

Bernie broke a lot of rules. He was unapologetic about the socialist aspects of his vision for America and the world. He called for an actual political revolution. The people who answered his call—from the campaign’s official staff to volunteer organizers—broke a lot of rules, too. We all saw what Bernie saw. If we kept playing by the old rules, we were going to keep getting the same results. And the status quo was literally killing people, tearing families apart, and making rampant inequality worse.

You might think that throwing out all the rules would result in anarchy. It didn’t because, together with all of the volunteers, the Bernie campaign helped forge a new set of rules—rules that would help the campaign grow larger and more powerful than most of us thought possible. Rules that can now propel our movements for change to greater success faster than we would have earlier imagined.

And so even though we lost, something amazing happened. Together, we helped test, iterate, and define a new set of rules that have the power to catapult us out of the pit of incrementalism we found ourselves trapped in. We all felt the power unleashed by these new ways of doing things. That’s why so many of us came out of this campaign inspired and ready to continue to take on the establishment, with all their money and their power. Because we not only know that it’s possible to win, but we also learned some new ways to go about doing so.

The big vision, big goals, and big organizing that these revolutionary new rules enable, that is what this book is about. If we can put these new rules into action, and keep rewriting our rules to meet the obstacles that stand between the people and the change they want to see, then we can start to win the radical changes necessary to address the pressing issues of our time.

When you are rewriting the rules, you have to fail some of the time. That’s how you learn what truly works. This is how we win.

Over the course of the Bernie campaign, we learned many things that worked better or in totally different ways than the conventional wisdom or organizing orthodoxy suggested we should do things. One of those things never failed us—volunteers who showed up with the talent, time, experience, and passion to win a big fight.

So now it’s your turn. Maybe you’re a volunteer who is new to activism or a professional organizer who wants to apply big organizing in your work. Take these rules. Build huge and powerful movements. Pick a lot of fights, including lots of big ones! Propose the solutions we need but the politicians say are impossible to win. Along the way you will most certainly need to improve these rules. Some of them you may need to throw out. And, of course, we look forward to seeing the new rules you write!

We want to close with a thank you from the bottom of our hearts to the leaders we worked with across hundreds of communities. There was never a discussion about who this book should be dedicated to. This book was inspired by and written for all the people who are leading in ways big and small to build the political revolution. Bernie wasn’t the leader we’ve been waiting for. You all were.

Why Bernie Sanders Came Up Short—and How That Lesson Can Fuel Future Progressive Victories

Davos Man Confronts Trumpocalypse Over Canapés
With Trump an enigma at best to the movers and shakers of the world, one country has stepped into the breach in an attempt to seize the attention at the world’s most elite conference.

The village of Davos in the Swiss Alps has seen a lot, but it has never seen anything quite like the impact of Donald Trump. As the men and women who used to be called (or call themselves) “masters of the universe” assemble at the World Economic Forum there this week, the man who will be sworn in as President of the United States on Friday remains for most of them a mystery wrapped in an enigma wrapped in a Twitter account.

Conference organizers tell The Daily Beast that Trump was invited in the past, like many another putative billionaire, but he never came. One suspects he didn’t want to be outclassed in wealth, power, and intelligence by so many people in such close quarters. And while many of the CEOs in attendance in Switzerland have brushed up against Trump in business or on the golf course, it’s fair to say that never in their wildest dreams did they imagine they’d one day see him being sworn in as the Leader of the Free World.

A year ago this time, conventional wisdom among the caviar and Champagne crowd slip-sliding around Davos streets was that Trump’s fledgling candidacy was a hiccup, or maybe a belch, in an otherwise healthy American democracy. The Clintons were familiar faces at Davos; Hillary’s victory seemed assured, and she could be counted on for a steady hand at the global helm. Now, the hand that will be there seems to spend long nights typing truculent 140-character capital-letter missives onto a cell phone.

The net result is that global leaders are looking elsewhere for a stable anchor in a stormy world, and the country that’s stepping forward at Davos to present its case for leadership is not the United States, not even Russia, and not any European country or collection of them, but China. Xi Jinping will give the opening address for the conference, the first time a Chinese premier has ever taken such a role.

“We’re at an inflection point,” says Adrian Monck, a member of the WEF managing board and longtime director of communications.

Yes, John Kerry, a longtime Davos aficionado, will be making an appearance, but he’s the lamest of lame ducks. The United States is pulling back. And where President Barack Obama tried to lead from behind in order to build broad consensus in global affairs, Trump may decide simply to try to walk away if the world won’t play by his ad hoc and sometimes arbitrary rules.

So, says Monck, “What China has to say about its role in the global economy is hugely important. The potential lies there for trade wars, and some warn of shooting wars. But even if the Chinese meet Trumpian truculence with Mandarin delicacy, much of the planet may start looking to them to set the tone for international affairs.

“In the past, when a new president came into office, the world would adjust to the United States,” says Monck. “This time around America is going to have to adjust to the world.”

But here’s the crowning irony of Davos summiteering: the high and the mighty have very often predicted with reasonable accuracy, for better or worse, the turns that world events would take. They have warned the planet and each other. Yet they rarely managed to avert catastrophe. And that tradition goes way back.

* * *

Ever since a luxury sanatorium opened high above the village of Davos in 1900, intellectuals have ridden the near-vertical railway up to enjoy the sun and the air, and opine on the future of the world. When the German novelist Thomas Mann took a cure there, he called it “The Magic Mountain,” and wrote about the coming of World War I in what he called “the catastrophe-smitten flat-land.” A few years later, the Nazi philosopher Martin Heidegger held forth, advocating a return to the kind of brutal nationalist primitivism favored by his much-admired führer, Adolph Hitler.

In the 1970s the World Economic Forum, organized by Geneva University professor Klaus Schwab, put Davos on the map as the site where each January the financial, business, and political elites of the world gathered to network, to see and be seen, and to share ideas about how they’d like to see the planet run.

As it grew and evolved, the event inevitably was caricatured as the place where CEOs arrived on private jets to talk about reining in greenhouse gasses, ate opulent meals and swilled copious quantities of expensive booze while rubbing elbows with do-gooder celebrities like Bono and Angelina Jolie and bemoaning the fate of the starving masses.

Every year they came up with recommendations for policies the world should follow, which they would recommend again the next year when it didn’t. In the meantime, what Samuel Huntington dubbed “Davos Man” did help to push and implement policies that steadily opened the world to big companies, to vast capital flows, to migration flows, and what proved to be the cruel Darwinism of globalization.

Did they know this was dangerous? Yes indeed. I witnessed first-hand the pessimism of world economic leaders at Davos in January 2008 as they talked at a luncheon behind closed doors about the perilous nature of the over-leveraged global economy. Yet in public they were optimistic—and eight months later in September that same year their darkest predictions came true with the global crash.

In 2014, two and a half years after the “Occupy Wall Street” protests had helped launch a ferocious debate about the One Percent who controlled an obscene share of the world’s wealth, the Davos elites (a tiny fraction of that same one percent) were supposed to talk about “inequality.” But that was quickly forgotten.

As I wrote at the time, “Once the conference was in full swing, few people talked, and even fewer seemed to care, about inequality.” The most popular video on laptops and iPads was a Jon Stewart “Daily Show” segment about the hypocrisy of the event. Citing the stunning statistic that 85 people on this planet control as much wealth as 3.5 billion, Stewart said “Jesus Christ [pause] would not be very happy about that.”

For most of the big executives there, Davos was, and is, a place to make more deals face to face with more people much faster than they could anywhere else—then spend a few hours on the slopes or taking in the esoteric offerings on the conference agenda, like a talk Goldie Hawn gave in 2014 about meditation. “I like to improve my mind,” one influential American CEO told me back then.

But, in truth, that wasn’t doing much to improve the world.

* * *

Ironically, Klaus Schwab himself was the ultimate Cassandra, warning of doom only to discover nobody would act on his prophecies, when he predicted way back in 1996 in a piece he co-authored for the erstwhile International Herald Tribune that ran under the headline “Start Taking the Backlash Against Globalization Seriously.”

Twenty-one years later, it reads as if it were written yesterday.

Schwab warned that in many industrial democracies the mood was “one of helplessness and anxiety, which helps explain the rise of a new brand of populist politicians.”

(Kind of gives you a chill when you read that, no?)

The “lightning speed” at which capital moved across borders, the acceleration of technological changes, the rapid evolution of global marketing and management requirements—all strained the existing system “to a breaking point,” said Schwab. “This is multiplying the human and social costs of the globalization process to a level that tests the social fabric of the democracies in an unprecedented way.”

(And this was before the rise of terrorism and the endless wars of this new century had begun to strain that fabric as well.)

“Until now,” Schwab wrote in 1996, “it was conventional wisdom that technological change and increases in productivity would translate into more jobs, higher wages. But in the last few years technological changes have eliminated more jobs than they have created.”

(This was just as NAFTA was getting into gear; just as Europe was about to launch its single currency.)

“It becomes apparent that the head-on mega-competition that is part and parcel of globalization leads to winner-take-all situations,” wrote Schwab. “Those who come out on top win big, and the losers lose even bigger. The gap between those able to ride the wave of globalization … and those left behind is getting wider at the national, corporate, and individual levels….

“The way transnational corporations have to operate to compete in the global economy means that it is now routine to have corporations announce new profit increases along with a new wave of layoffs,” as Schwab noted.

“Some estimates put at 3 million the number of layoffs since the end of the 1980s in the United States, and more are expected,” said Schwab before penning a line to be remembered: “It is no consolation for a laid-off employee to hear analysts explain how the re-engineering of which he is a victim will help his former employer prosper.”

“Public opinion in the industrial democracies will no longer be satisfied with articles of faith about the virtues and future benefits of the global economy,” he wrote. “It is pressing for action.”

Schwab’s recommendation was to set national priorities: training and education, overhauling communications and infrastructure, developing policies that gave more incentives to entrepreneurs, and adapting social policies to protect those who lose out. Corporations, too, would have to make sure the “free market on a rampage” did not become “a brakeless train wreaking havoc,” he wrote.

Some of that happened. But not much. Not nearly enough. The doom of Davos Man that Klaus Schwab warned of finally arrived 20 years later, and with names attached to it: like Brexit and, of course, Donald Trump.

Davos Man Confronts Trumpocalypse Over Canapés

Just Eight Men Own Same Wealth as Half of Humanity: Report
As the super-rich descend on Davos, report reveals how these billionaires are fueling the global inequality crisis

The private jets of the world's wealthiest men and women are swarming the Swiss Alps for the annual World Economic Forum (WEF), which begins Monday in Davos, Switzerland, in the midst of an ongoing global inequality crisis.

And that crisis is accelerating, according to a new Oxfam report released Monday: today, only eight men own the same amount of wealth as the 3.6 billion people who comprise the poorest half of humanity. Those eight men are Bill Gates, Amancio Ortega, Warren Buffett, Carlos Slim Helu, Jeff Bezos, Mark Zuckerberg, Larry Ellison, and Michael Bloomberg.

The report, An Economy for the 99% (pdf), observes that "[f]ar from trickling down, income and wealth are being sucked upwards at an alarming rate."

It goes on to describe how super-rich individuals and the massive corporations they run are fueling the inequality crisis by offshoring taxes, driving down wages, and influencing government to their advantage, and argues that the "very design of our economies and the principles of our economics have taken us to this extreme, unsustainable, and unjust point."

"It is obscene for so much wealth to be held in the hands of so few when one in 10 people survive on less than $ 2 a day," said Oxfam International director Winnie Byanyima in a statement. "Inequality is trapping hundreds of millions in poverty; it is fracturing our societies and undermining democracy."

Indeed, the report links rapidly rising inequality with the vote for Brexit and the election of President-elect Donald Trump, a frightening rise in xenophobia, and widespread frustration with mainstream politics.

"There are increasing signs that more and more people in rich countries are no longer willing to tolerate the status quo," the report notes. "Why would they, when experience suggests that what it delivers is wage stagnation, insecure jobs, and a widening gap between the haves and the have-nots?"

The report's research also highlights how rising inequality in poorer nations fuels profits to the world's wealthiest.

"Oxfam interviewed women working in a garment factory in Vietnam who work 12 hours a day, six days a week and still struggle to get by on the $ 1 an hour they earn producing clothes for some of the world's biggest fashion brands," the organization wrote. "The CEOs of these companies are some of the highest paid people in the world. Corporate tax dodging costs poor countries at least $ 100 billion every year. This is enough money to provide an education for the 124 million children who aren't in school and fund healthcare interventions that could prevent the deaths of at least six million children every year."

"Across the world, people are being left behind," Byanyima said. "Their wages are stagnating yet corporate bosses take home million dollar bonuses; their health and education services are cut while corporations and the super-rich dodge their taxes; their voices are ignored as governments sing to the tune of big business and a wealthy elite."

The report also outlines a plan for a "human economy" that would work to combat the exponential rise of global inequality.

"Together we need to create a new common sense, and turn things on their head to design an economy whose primary purpose is to benefit the 99 percent, not the one percent," the report reads. "The group that should benefit disproportionately from our economies are people in poverty, regardless of whether they are in Uganda or the United States. Humanity has incredible talent, huge wealth and infinite imagination. We need to put this to work to create a more human economy that benefits everyone, not just the privileged few."

It is hard to imagine Davos as the place to create this economy: while the WEF is purportedly focusing anew on inequality this year, the super-rich and leaders of multinational corporations who attend the forum continue to offshore trillions of dollars worth of taxes.

"We have a situation where billionaires are paying less tax often than their cleaner or their secretary," Max Lawson, Oxfam's policy advisor, told the Associated Press. "That's crazy."

Just Eight Men Own Same Wealth as Half of Humanity: Report

Aid in reverse: how poor countries develop rich countries

We have long been told a compelling story about the relationship between rich countries and poor countries. The story holds that the rich nations of the OECD give generously of their wealth to the poorer nations of the global south, to help them eradicate poverty and push them up the development ladder. Yes, during colonialism western powers may have enriched themselves by extracting resources and slave labour from their colonies – but that’s all in the past. These days, they give more than $ 125bn (£102bn) in aid each year – solid evidence of their benevolent goodwill.

This story is so widely propagated by the aid industry and the governments of the rich world that we have come to take it for granted. But it may not be as simple as it appears.

The US-based Global Financial Integrity (GFI) and the Centre for Applied Research at the Norwegian School of Economics recently published some fascinating data. They tallied up all of the financial resources that get transferred between rich countries and poor countries each year: not just aid, foreign investment and trade flows (as previous studies have done) but also non-financial transfers such as debt cancellation, unrequited transfers like workers’ remittances, and unrecorded capital flight (more of this later). As far as I am aware, it is the most comprehensive assessment of resource transfers ever undertaken.

What they discovered is that the flow of money from rich countries to poor countries pales in comparison to the flow that runs in the other direction.

In 2012, the last year of recorded data, developing countries received a total of $ 1.3tn, including all aid, investment, and income from abroad. But that same year some $ 3.3tn flowed out of them. In other words, developing countries sent $ 2tn more to the rest of the world than they received. If we look at all years since 1980, these net outflows add up to an eye-popping total of $ 16.3tn – that’s how much money has been drained out of the global south over the past few decades. To get a sense for the scale of this, $ 16.3tn is roughly the GDP of the United States

What this means is that the usual development narrative has it backwards. Aid is effectively flowing in reverse. Rich countries aren’t developing poor countries; poor countries are developing rich ones.

What do these large outflows consist of? Well, some of it is payments on debt. Developing countries have forked out over $ 4.2tn in interest payments alone since 1980 – a direct cash transfer to big banks in New York and London, on a scale that dwarfs the aid that they received during the same period. Another big contributor is the income that foreigners make on their investments in developing countries and then repatriate back home. Think of all the profits that BP extracts from Nigeria’s oil reserves, for example, or that Anglo-American pulls out of South Africa’s gold mines.

But by far the biggest chunk of outflows has to do with unrecorded – and usually illicit – capital flight. GFI calculates that developing countries have lost a total of $ 13.4tn through unrecorded capital flight since 1980.

Most of these unrecorded outflows take place through the international trade system. Basically, corporations – foreign and domestic alike – report false prices on their trade invoices in order to spirit money out of developing countries directly into tax havens and secrecy jurisdictions, a practice known as “trade misinvoicing”. Usually the goal is to evade taxes, but sometimes this practice is used to launder money or circumvent capital controls. In 2012, developing countries lost $ 700bn through trade misinvoicing, which outstripped aid receipts that year by a factor of five.

Multinational companies also steal money from developing countries through “same-invoice faking”, shifting profits illegally between their own subsidiaries by mutually faking trade invoice prices on both sides. For example, a subsidiary in Nigeria might dodge local taxes by shifting money to a related subsidiary in the British Virgin Islands, where the tax rate is effectively zero and where stolen funds can’t be traced.

GFI doesn’t include same-invoice faking in its headline figures because it is very difficult to detect, but they estimate that it amounts to another $ 700bn per year. And these figures only cover theft through trade in goods. If we add theft through trade in services to the mix, it brings total net resource outflows to about $ 3tn per year.

That’s 24 times more than the aid budget. In other words, for every $ 1 of aid that developing countries receive, they lose $ 24 in net outflows. These outflows strip developing countries of an important source of revenue and finance for development. The GFI report finds that increasingly large net outflows have caused economic growth rates in developing countries to decline, and are directly responsible for falling living standards.

Who is to blame for this disaster? Since illegal capital flight is such a big chunk of the problem, that’s a good place to start. Companies that lie on their trade invoices are clearly at fault; but why is it so easy for them to get away with it? In the past, customs officials could hold up transactions that looked dodgy, making it nearly impossible for anyone to cheat. But the World Trade Organisation claimed that this made trade inefficient, and since 1994 customs officials have been required to accept invoiced prices at face value except in very suspicious circumstances, making it difficult for them to seize illicit outflows.

Still, illegal capital flight wouldn’t be possible without the tax havens. And when it comes to tax havens, the culprits are not hard to identify: there are more than 60 in the world, and the vast majority of them are controlled by a handful of western countries. There are European tax havens such as Luxembourg and Belgium, and US tax havens like Delaware and Manhattan. But by far the biggest network of tax havens is centered around the City of London, which controls secrecy jurisdictions throughout the British Crown Dependencies and Overseas Territories.

In other words, some of the very countries that so love to tout their foreign aid contributions are the ones enabling mass theft from developing countries.

The aid narrative begins to seem a bit naïve when we take these reverse flows into account. It becomes clear that aid does little but mask the maldistribution of resources around the world. It makes the takers seem like givers, granting them a kind of moral high ground while preventing those of us who care about global poverty from understanding how the system really works.

Poor countries don’t need charity. They need justice. And justice is not difficult to deliver. We could write off the excess debts of poor countries, freeing them up to spend their money on development instead of interest payments on old loans; we could close down the secrecy jurisdictions, and slap penalties on bankers and accountants who facilitate illicit outflows; and we could impose a global minimum tax on corporate income to eliminate the incentive for corporations to secretly shift their money around the world.

We know how to fix the problem. But doing so would run up against the interests of powerful banks and corporations that extract significant material benefit from the existing system. The question is, do we have the courage?

Aid in reverse: how poor countries develop rich countries

Is an Economic Oil Crash Around the Corner?
New research suggests that the world faces an imminent oil crunch, which will trigger another financial crisis.

A report by HSBC shows that contrary to industry mythology, even amidst the glut of unconventional oil and gas, the vast bulk of the world’s oil production has already peaked and is now in decline, while European government scientists show that the value of energy produced by oil has declined by half within the first 15 years of the 21st century.

The upshot? Welcome to a new age of permanent economic recession driven by ongoing dependence on dirty, expensive, difficult oil—unless we choose a fundamentally different path.

Last September, a few outlets were reporting the counterintuitive findings of a new HSBC research report on global oil supply. Unfortunately, the true implications of the HSBC report were largely misunderstood.

New scientific research suggests that the world faces an imminent oil crunch, which will trigger another financial crisis.

The HSBC research note — prepared for clients of the global bank — found that contrary to concerns about too much oil supply and insufficient demand, the situation was opposite: global oil supply in coming years will be insufficient to sustain rising demand.

Yet the full, striking import of the report, concerning the world’s permanent entry into a new age of global oil decline, was never really explained. The report didn’t just go against the grain of the industry’s hype about "peak demand": it vindicated what is routinely lambasted by the industry as a myth: peak oil ,  the concurrent peak and decline of global oil production.

The HSBC report you need to read

Insurge Intelligence obtained a copy of the report in December 2016, and for the first time we are exclusively publishing the entire report in the public interest. Read and/or download the full HSBC report.

Headquartered in London, HSBC is the world’s sixth largest bank, holding assets of $ 2.67 trillion. So when it produces a research report for its clients, we should listen. Among the report’s most shocking findings is that, “81% of the world’s total liquids production is already in decline.”

Between 2016 and 2020, non-OPEC production will be flat due to declines in conventional oil production, even though OPEC will continue to increase production modestly. This means that by 2017, deliverable spare capacity could be as little as 1% of global oil demand.

This heightens the risk of a major global oil supply shock around 2018 which could “significantly affect oil prices.”

The report asserts that peak demand (the idea that demand will stop growing leaving the world awash in too much supply), while certainly a relevant issue due to climate change agreements and disruptive trends in alternative technologies, is not the most imminent challenge:

“Even in a world of slower oil demand growth, we think the biggest long-term challenge is to offset declines in production from mature fields. The scale of this issue is such that in our view rather there could well be a global supply squeeze some time before we are realistically looking at global demand peaking.”

Under the current supply glut driven by rising unconventional production, falling oil prices have damaged industry profitability and led to dramatic cut backs in new investments in production. This, HSBC says, will exacerbate the likelihood of a global oil supply crunch from 2018 onwards.

Four Saudi Arabias, anyone?

The HSBC report examines two main datasets from the International Energy Agency and the University of Uppsala’s Global Energy Systems Program in Sweden.

The latter has consistently advocated a global peak oil scenario for many years — the HSBC report confirms the accuracy of this scenario, and shows that the IEA’s data supports it.

The rate and nature of new oil discoveries has declined dramatically over the last few decades, reaching almost negligible levels on a global scale, the report finds. Compare this to the report’s warning that just to keep production flat against increasing decline rates, the world will need to add four Saudi Arabia’s worth of production by 2040. North American production, despite remaining the most promising in terms of potential, will simply not be able to fill this gap.

Business Insider, the Telegraph and other outlets that covered the report last year acknowledged the supply gap, but failed to properly clarify that HSBC’s devastating findings basically forecast the longterm scarcity of cheap oil due to global peak oil, from 2018 to 2040.

The report revises the way it approaches the concept of peak oil — rather than forecasting it as a single global event, the report uses a disaggregated approach focusing on specific regions and producers. Under this analysis, 81% of the world’s oil supply has peaked in production and so now “is post-peak.”

Using a more restrictive definition puts the quantity of global oil that has peaked at 64%. But either way, well over half the world’s global oil supply consists of mature and declining fields whose production is inexorably and irreversibly decreasing:

“If we assumed a decline rate of 5%pa [per year] on global post-peak supply of 74mbd — which is by no means aggressive in our view — it would imply a fall in post-peak supply of c.38mbd by 2030 and c.52mbd out to 2040. In other words, the world would need to find over four times the size of Saudi Arabia just to keep supply flat, before demand growth is taken into account.”

What’s worse is that when demand growth is taken into account — and the report notes that even the most conservative projections forecast a rise in global oil demand by 2040 of more than 8mbd above that of 2015 — then even more oil would be needed to fill the coming supply gap.

But with new discoveries at an all-time low and continuing to diminish, the implication is that oil can simply never fill this gap.

Technological innovation exacerbates the problem

Much trumpeted improvements in drilling rates and efficiency will not make things better, because they will only accelerate production in the short term while, therefore, more rapidly depleting existing reserves. In this case, the report concludes: "the decline-delaying techniques are only masking what could be significantly higher decline rates in the future.”

This does not mean that peak demand should be dismissed as a serious concern. As Michael Bradshaw, professor of global energy at Warwick University’s Sloan Business School, told me for my previous Vice article, any return to higher oil prices will have major economic consequences.

Price spikes, economic recession

Firstly, oil price spikes would have an immediate recessionary effect on the global economy, by amplifying inflation and leading to higher costs for social activity at all levels, driven by the higher underlying energy costs.

Secondly, even as spikes may temporarily return some oil companies to potential profitability, such higher oil prices will drive consumer incentives to transition to cheaper renewable energy technologies like solar and wind, which are already becoming cost-competitive with fossil fuels.

That means a global oil squeeze could end up having a dramatic impact on continued demand for oil, as twin crises of peak oil and peak demand end up intensifying and interacting in unfamiliar ways.

The demise of fossil fuels

But the HSBC report’s specific forecasts of global oil supply and demand are part of a wider story of global net energy decline.

A new scientific research paper authored by a team of European government scientists, published on Cornell University’s Arxiv website in October 2016, warns that the global economy has entered a new era of slow and declining growth. This is because the value of energy that can be produced from the world’s fossil fuel resource base is declining inexorably.

The paper—currently under review with an academic journal—was authored by Francesco Meneguzzo, Rosaria Ciriminna, Lorenzo Albanese, Mario Pagliaro, who collectively conduct research on climate change, energy, physics and materials science at the Italian National Research Council,  Italy’s premier government agency for scientific research.

According to HSBC, oil prices are likely to rise and stabilize for some time around the $ 75 per barrel mark. But the Italian scientists find that this is still too high to avoid destabilizing recessionary effects on the economy.

The Italian study offers a new model combining “the competing dynamics of population and economic growth with oil supply and price,” with a view to evaluate the near-term consequences for global economic growth.

Data from the past 40 years shows that during economic recessions, the oil price tops $ 60 per barrel, but during economic growth remains below $ 40 a barrel. This means that prices above $ 60 will inevitably induce recession.

Therefore, the scientists conclude that to avoid recession, “the oil price should not exceed a threshold located somewhat between $ 40/b [per barrel] and $ 50/b, or possibly even lower.”

More broadly, the scientists show that there is a direct correlation between global population growth, economic growth and total energy consumption. As the latter has steadily increased, it has literally fueled the growth of global wealth.

But even so, the paper finds that the world is experiencing: “declining average EROIs [Energy Return on Investment] for all fossil fuels; with the EROI of oil having likely halved in the short course of the first 15 years of the 21st century.”

EROI is the total value of energy a resource can generate, calculated by comparing the quantity of energy extracted, to the quantity of energy put in to enable the extraction.

This means that overall, despite total liquids production increasing, as the energy value it generates is declining, the overall costs of extraction are simultaneously increasing. This is acting as an increasing geophysical brake on global economic growth. And it means the more the economy remains dependent on fossil fuels, the more the economy is tied to the recessionary impact of global net energy decline: “The chance of future economic growth matching the current trajectory of the human population is inextricably bound to the wide and growing availability of highly concentrated energy sources enjoying broad applicability to energy end uses.”

The problem is that since the 1980s, the share of oil in the global energy mix has declined. To make up for this, economic growth has increasingly had to rely on clever financial instruments based on debt: in effect, the world is borrowing from the future to sustain our present consumption levels.

In an interview, lead author Francesco Meneguzzo explained:

“Global conventional oil peaked around the year 2005. All the following supply increase was due to unconventional oil exploitation and, since 2009, basically to U.S. shale (tight) oil, which in turn peaked around March, 2015.

"What looks like to be even more important, anyway, is the fact that global oil supply has failed to keep the pace with the increase in total energy consumption, which ‘natural’ growth requires to be approximately proportional to population increase, leading to the decline of the oil share in the energy mix. While governments have struggled to fuel their economies with ever increasing energy supply, other sources have steadily replaced oil in the energy mix, such as coal in China. Yet, no other conventional source has proved to be a valuable substitute for oil, hence the need for debt in order to replace the vanishing oil share.”

On a business-as-usual trajectory then, the economy can quite literally never recover — unless it transitions to a truly viable new energy source which can substitute for oil.

“In order to avoid the [oil] price affordable by the global economy falling below the extraction cost, debt piling (borrowing from the future) becomes a necessity, yet it is a mere trick to gain some time while hoping for something positive to happen,” said Meneguzzo. “The reality is that debt, basically as a substitute for oil, does not work to produce real wealth, as apparent for example from the decline of the industry value added as a percentage of GDP.”

Where will this end up?

“Recently, debt has started shrinking, basically because it has failed to generate real wealth. Assuming no meaningful (and fast) transition to renewable energy, the economic growth can only deteriorate further and further.”

Basically, this means, Meneguzzo adds, “delocalizing manufacturing to economies using local, cheaper and dirtier energy sources (such as coal in China) as well as lower wages, further shrinking domestic aggregate demand and fueling a downward spiral of deflation and/or debt.”

Is there a way out? Not within the current trajectory: “Unless that debt is immediately used to exploit renewable sources on a massive scale, along with ‘accessories’ such as storage making them as qualified as oil, social and political derangements, even before an economic crash, look to be unavoidable.”

Crisis convergence

Seen in this broader scientific context, the HSBC global oil supply report provides stunning confirmation that for the most part, global oil production is already in post-peak ,  and that after 2018, this is going to manifest in not simply a global supply shock, but a world in which cheap, high quality fossil fuels is increasingly hard to find.

What will this mean? One possible scenario is that by 2018 or shortly thereafter, the world will face a similar convergence of global crises that occurred a decade earlier.

In this scenario, oil price hikes would have a recessionary affect that destabilizes the global debt bubble, which for some years has been higher than pre-2008 crash levels, now at a record $ 152 trillion.

In 2008, oil price shocks played a key role in creating pre-crisis economic conditions for consumers in which rising living costs helped trigger debt-defaults in housing markets, which rapidly spiraled out of control.

In or shortly after 2018, economic and energy crisis convergence would drive global food prices up, regenerating the contours of the triple crunch we saw ravage the world from 2008 to 2011, the debilitating impacts of which we have yet to recover from.

2018 is likely to be crunch year for another reason. Jan. 1, 2018 is the date when a host of new regulations are set to come in force, which will “constrain lending ability and prompt banks to only advance money to the best borrowers, which could accelerate bankruptcies worldwide,” according to Bloomberg. Other rules to come in play will require banks to stop using their own international risk assessment measures for derivatives trading.

Ironically, the introduction of similar well-intentioned regulation in January 2008 (through Basel II) laid the groundwork to rupture the global financial architecture, making it vulnerable to that year’s banking collapse.

In fact, two years earlier in July 2006, David Martin, an expert on global finance, presciently forecast that Basel II would interact with the debt bubble to convert a collapse of the housing bubble into a global financial conflagration. Just a month after that warning, I was told by a former senior Pentagon official with wide-ranging high-level access to the U.S. military, intelligence and financial establishment that a global banking collapse was imminent, and would likely occur in 2008.

My source insisted that the event was bound up with the peak of global conventional oil production about two years earlier (which according to the U.K.’s former chief government scientist Sir David King did indeed occur around 2005, even though unconventional oil and gas production has offset the conventional decline so far).

Having first outlined my warning of a 2008 global banking collapse in August 2006, I re-articulated the warning in November 2007, citing Martin’s forecast and my own wider systems analysis at a lecture at Imperial College, London. In that lecture, I predicted that a housing-triggered banking crisis would be sparked in the context of the new era of expensive fossil fuels.

I called it then, and I’m calling it now. Some time after January 2018, we are seeing the probability of a new crisis convergence in global energy, economic and food systems, similar to what occurred in 2008.

Today, we are all supposed to quietly believe that the economy is in recovery, when in fact it is merely transitioning through a fundamental global systemic phase-shift in which the unsustainability of prevailing industrial structures are being increasingly laid bare. The truth is that the cycles of protracted economic crisis are symptomatic of a deeper global systemic process.

One way we can brace ourselves for the next crash is to recognize it for what it is: a symptom of global system failure, and therefore of the inevitable transition to a post-carbon, post-capitalist future. The future we are stepping into simply doesn’t work the way we are accustomed to.

The old, industrial era rules for the dying age of energy and technological super-abundance must be re-written for a new era beyond fossil fuels, beyond endless growth at any environmental cost, beyond debt-driven finance.

This year, we can prepare for the post-2018 resurgence of crisis convergence by planting seeds — however small — for that future in our own lives, and with those around us, from our families, to our communities and wider societies.

Is an Economic Oil Crash Around the Corner?

Source: ONTD_Political

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