Special Report: Peak Oil

Oil: No Supply Side Answer to the Coming Crisis

Rather soon, we have to find mechanisms and processes to ensure an orderly and permanent annual reduction in world oil demand at least equal to expected net loss of supply as we come out of the 'undulating plateau'.

By Andrew McKillop
Published April 06, 2009

this article has been updated

Neoliberal Notions

One hangover from the neoliberal 1980s is the myth of 'supply side solutions'. For oil, the key target is to keep prices low as long as possible because "High oil prices hurt growth". In practice, giving this myth some substance needs a sharp fall in economic growth and energy demand destruction.

After this, the myth goes on, oil prices will recover slower than economic growth, allowing a window of opportunity for building another fragile asset bubble. The key element, therefore, is demand destruction because supply growth is slow, underlining that so-called 'supply side solutions' are in fact demand-linked and demand-constrained.

Without a certain period of destroyed demand, supply side responses cannot work.

Entry to the present and most severe economic recession since the 1929-31 run-up to the Great Depression and its late 1970s harbinger, the 1979-83 recession led to serious demand destruction for oil. Both also caused plenty of collateral damage right across the economy. Worse, however, is the fact that the coming opportunity window for generating another asset bubble will surely be shorter than in the 1980s, 1990s, or the post-911 asset bubble of 2002-2007.

The 1979-83 recession caused the first and only three-year consecutive fall in world oil demand since World War II. The recession in 2008-2009 is already producing impressive cuts in world oil demand, but from a much higher base. Comparing the 1979-83 period with today, the differences are huge. Global oil demand was running at around 64 million (million barrels/day) in 1980, compared with 88 million barrels per day in mid-2008 and 85.5 million barrels per day in March 2009.

The growth of average demand through this long period was about seven billion barrels per year. This is reflected by total drawdown of global oil reserves in the long period 1998-2008, about 275 billion barrels. This is well above the remaining official oil reserves of Saudi Arabia - themselves likely exaggerated by 40 percent.

Taking other major exporters, we can note that world oil extraction in 1980-2008 was more than three times remaining Iraqi reserves, over three times Kuwaiti reserves, nearly three times Iranian reserves - and so on.

Therefore we can say, with no risk of being contradicted, that the chance of another long classic and conventional economic growth period following the present energy demand destroying recession is absolute zero.

Supply side solutions did not run out of rhetoric or wishful thinking - but they did run out of oil.

Other Big Differences

The intense recession of the 1979-83 Reagan-Thatcher heyday was brought on by swinging interest rate hikes, massive business failures and spiraling joblessness for millions of people. Today we have the second two, but certainly not the first! Any 'vigorous and courageous' increase in interest rates, today, will collapse the entire global economy - that is sure.

In the early 1980s, falling oil demand was an unsurprising spinoff from this 'fiscal rigour' or latter-day monetarism, but today's context is more complex and contrarian.

Near zero base rates set by the US Fed, BoJ, BoE and ECB, and incredibly massive Keynesian-type deficit spending by governments around the world, including China and Russia, should in theory be generating a flurry of growth, but is not yet doing so.

Even worse for the outlook, cheap oil is surely not going to operate for a long lost decade, as it did through 1986-99. To be sure, we could forecast 13 weeks of oil prices below about $50-55 USD per barrel on the WTI future from March 2009, but 13 months is already off limits. 13 years is outside of all possibility.

This underlines one simple fact: supply side solutions for oil are now finished. Energy transition is the coming No Alternative - and a lot more certain than neoliberal "no alternatives" such as financial derivatives creation and trading. No longer can cheap oil be locked in by slow rates of economic growth, de-industrialisation and outplacement, and low-wage kleenex jobs.

In reality, increased oil supply in the 1980s and 1990s was due to the final burst of major world oil discoveries in the 1950s and 1960s. Other supply and demand factors also depressed oil prices, including "quota fighting" among OPEC states, technology and industrial change, geopolitical pressures in the Mid East and central Asia, the arrival of big new supplies of cheap natural gas, increasing export supply of very cheap coal, deindustrialisation and lower energy intensity of the economy in the 'mature postindustrial' OECD countries, and so on.

In the 1986-99 period there was only one bottom line to oil prices - they were low and trending lower. Any oil analyst only had to say 'OPEC overproduction' and maybe add 'Sunset commodities' to explain why the whole real resource sector was bargain basement, while entirely virtual financial services generated big profits.

As late as March 1999, the cheerleader of neoliberal punk economics, The Economist magazine, could peek into its New Economy crystal ball and announce a future price trend for oil of "probably not much above five US dollars per barrel".

200 Dollar Oil

Through late 2007/early 2008 analysts, forecasters and commentators fell over themselves to tell the press and media that after $150 oil the world would have to pay $200 per barrel "sometime soon". One of these forecasters was none other than Dmitri Medvedev, then Gazprom chief.

By end-year 2008 the price outlook was more like $35 oil, but the price bottom was near.

Finding out how long it will take for oil prices to bounce back to the US $75 to $100 range is, of course, a key question, but it can be answered! By late 2010 and perhaps before, there will likely be perceptible physical shortage on world oil markets. The main controlling variable has nothing to do with supply, but demand.

Whenever the present global recession shakes into a sickly and inflation-riddled imitation of economic recovery, oil prices will already be at US $75 per barrel. This semi-recovery of global economic growth and much higher oil prices could occur by early 2010, but as noted above it could be sooner. After we arrive at this price level, structural supply shortage can quickly lead to very high prices.

The basic cause is structural high demand coupled with flagging supply growth. To be sure, the "Asian decoupling theory" has taken serious flak in 2008-2009 to date, especially concerning trade and investment, but one of the few ways to lever up global economic growth is rising growth, investment and consumption outside the 'postindustrial' OECD countries, especially in the emerging new industrial superpowers of China, India, Brazil, Pakistan, Turkey and Iran (with a combined population close to 2.8 Billion compard to just over 1 Bn for the OECD group).

Recession in these countries means a fall in economic growth from near-double digit annual percentage rates, to around 4-6 percent annual. Any hike in world economic growth trends, even small, will inevitably result in world oil demand breaking out of its current free fall - which we can note in percent terms is running well behind the percent rate of global oil demand contraction during the 1979-83 recession.

Part of this difference (about 2.7 percent reduction in 2008-2009, but about 3.6 percent annual in 1980-82) is due to a higher base for global oil demand today, but another is structural. One easy example is the world car fleet, more than doubled to around 925 million units in 2009 from the 1980 score.

Similar growth has operated for other oil-hungry parts of the global economy including airline fleets and maritime bulk cargo fleets, the agriculture and food production sector, urban development and public works.

On the supply side, for oil, things are serious and getting worse. Even in recession, geological depletion of global oil reserves and aging of already-very-old production infrastructures do not take a holiday, surprising as this may seem to some economic 'experts'. The world oil and gas industry, due to many years of non-renewal and low investment in the 1980S and 1990s cheap-oil period, is heavily exposed to accelerated aging.

This can only be corrected, or slowed in its impacts, by massive spending. Without higher oil prices, this is impossible.

By at latest 2010, depletion will tilt the supply/demand balance to overall loss of world supply, not covered by NGLs, syncrude, gas and oil conversion and even less so by biofuels (supplying about 0.6 billion barrels oil equivalent, annual). This tilt, or the end of the 'undulating plateau' of world supply which has lasted since 2005-2006, where depleting conventional oil is just covered by unconventional, is even possible in late 2009.

No 'Price Elastic' Response to Demand Growth

Through 1999-2007, world oil demand growth progressively ratcheted up, sometimes attaining (in 2004) rates as high as 3.2 percent per year. Rising prices had little or no impact on demand growth, specially in the "decoupled Asia" growth economies. This totally contradicts cozy liberal notions of 'price elastic adjustment', or 'inevitable' oil demand destruction when prices rise, despite even faster growth of world natural gas and coal burning. Put another way, without cheaper gas and very cheap coal, oil demand growth would likely have been even higher.

This is energy economic reality. The real world is also facing another reality: runaway climate change. Unlike peak oil, this somber challenge to simple human survival - not just to economic growth! - is now recognized as serious, concerning everybody, and needing both legislative and economic, fiscal and other responses.

Around two-thirds of global climate changing gas emissions are due to burning fossil fuels, making the link very clear. Currently however, we only have the 'mechanism' of financial-driven global economic recession, today, or economic recession driven by swingeing interest rates hikes, in the 1980s, as the ways we could ensure that oil and other fossil fuel demand falls. What could be more fine-tuned than that?

In other words, rather soon, we have to find non-market mechanisms and processes, including legislative and regulatory leverage, to ensure an orderly and permanent annual reduction in world oil demand at least equal to expected net loss of supply as we come out of and off the 'undulating plateau'.

This is likely to be about four percent per year, perhaps more. This is equivalent to losing more than current total oil demand of either Germany or South Korea, every year.

Fantasy Solutions - Supply Side Miracles

Perhaps not surprisingly, this kind of harsh real world outlook generates fantasy solutions.

Stoic defenders of cheap oil in a real world context of levered-up demand, but only weak and hesitant growth of supply, such as the International Energy Agency (IEA) and the dwindling coterie of quotable energy 'experts' and oil analysts, claim that world oil production could be ramped up to 115 or 120 million barrels per day by 2020-2025, belatedly taking account of underlying growth trends since the late 1990s.

In other words, based on a current daily demand average around 86 million barrels per day, world oil production should be increased by 35 million barrels per day in about 15 years. The simplest challenge to this laughable fantasy is to ask if anything like this has ever been done before, to which the definitive answer is no.

The next challenge is to add the net additions to world production capacity needed to satisfy this fantasy, about 2.33 million barrels per day per year, to annual losses of capacity, running at about three million barrels per day per year. This returns a bottom line of a need to find, prove and produce over five million additional barrels per day, every year.

Comparing this with actual results in the real world during the last ten or 20 or 30 years returns only one answer: it cant be done.

Completely ignoring depletion losses to world production capacity, more than three new Saudi Arabias must be found, proven, developed and placed into reliable supply in less than 15 years. Surprising or not, this calculation (around 36 million barrels per day of new capacity needed by about 2020) has been published in the ExxonMobil in-house journal The Lamp under the name of ExxonMobil Exploration Company's CEO, Jon Thompson.

Only three of the oil major corporations (BP, ExxonMobil and Shell) have production capacities above two million barrels per day, and declared annual discoveries of the ten largest oil corporations through 2002-2008 rarely surpassed six billion barrels, often less. World oil demand in recession-hit 2009 will be around 30 billion barrels, after more than 31 billino barrels in 2008.

The 'supply gap' in the next 15 years can be put another way. Relative to the Iraq prize for G.W. Bush strategists including Paul Wolfowitz, this war "having nothing to do with oil", additional capacity needed by around 2020-2025, supposing the growth economy is resuscitated, would be about twenty new Iraqs.

That is, based on Iraq's current production and export capacity. Not only did Iraq not have vast stocks of WMDs, we were told by General Colin Powell long after the war was declared, but Iraq also does not have vast reserves of light sweet crude waiting to be produced (or plundered). Iraq's role in relation to the coming oil crunch is in fact tiny and insignificant.

Demand Side Reality

One part of the puzzle is consistent underesimation of world oil demand growth, at least until well after 2000. The IEA's so-called 'long-term trend rate' of around 1.25 percent to 1.4 percent per year, which held from the mid-1980s until about 1995 was finally revised up closer to the underlying and basic rate well above 2 percent a year generated by global economic growth since the late 1990s.

This is reflected by belated 'corrections' of IEA estimates, as shown below, from 2002, forecasting growth of up to 42 million barrels per day in demand through 2002-2022.

Graph: Oil Demand Growth Forecasts Matter
Graph: Oil Demand Growth Forecasts Matter

Since around 2005, the main, sometimes only official culprit for this levered-up basic growth trend running at around two million barrels per day per year is: China. Unexpectedly or not, this country is now the world's industrial powerhouse, but only uses about 2.5 barrels per year per person (compared with 25 for the USA, and 14.3 on average for all OECD countries, 2007).

The simple explanation is China's much lower but growing per capita income, plus lots of coal. China's massive coal burn supplies around 17 million barrels per day in oil equivalent terms, and allows China to beat even the USA in total greenhouse gas emission.

Fingering China as the unique culprit, a swath of finance journal leader writers can hope out loud that China's rulers decide to ease off the gas pedal but not the coal shovel, and even slow down the country's economic growth (Chinese economic growth also being held as the main driver for surging non-oil commodity prices), but this entirely ignores the other two-thirds of current oil demand growth at the aggregate world level.

This is a simple function of economic growth within the current structure of the global economy. Changing this will not be possible without highly organised and purposive programming based on solid and rational investment strategies, mobilizing large and reliable sources of financing and backed by legislation.

Today we have an Obama administration and other G20 leaders underlining their solemn engagement, and indulging in extremely massive public borrowing to save the world car industry, the world airline industry, homebuilding and urban construction, and so on, with the sole target of restoring absolutely conventional economic growth!

No Way Out But Energy Transition

With an ironclad determination to deny real and very close limits on global oil supply, and the need to at least cap coal and natural gas burning, leaderships of most countries are pursuing a "global growth strategy". This can only move the world closer to the very opposite of 'sustainable' anything except international conflict, the clash of civilizations, and runaway climate change.

Oil shortage made worse by refusing to restructure the economy towards low (or at least lower) oil intensity can only raise prices, then raise them again, if and when there is any recovery of the economy. The potential for another oil war in the Middle East, seeking heightened export performance or the defense of 'vital national interests' of the big oil importer countries will likely remain high.

As the Iraq tragedy shows, the end result of pre-emptive invasion of oil producer countries is long-lasting war, both civil, international, and North-South. After this stage in global destabilization due to oil hunger, we could move the ulitmate stage of rivalry between themselves by the nuclear armed, oil import dependent superpowers for diminishing oil production capacities.

The only way out is through clear and courageous decisions, and engagements to limit then decrease oil and gas demand, on a long-term, universal and rapidly progressive base.

Energy transition will need international cooperation and negotiation to set binding, long-term programmes for reducing fossil energy intensity (measured in barrels and barrel equivalent per head of population). This could be compared to the much modified and weakened engagements set by the Kyoto Treaty and process, which in a near-term future will surely include both the USA and China, the world's two biggest GHG emitter countries.

For energy transition, firstly oil transition and quite rapidly gas transition, the lengthy timeframe set by the Kyoto process for greenhouse gas emissions reduction is not available. Under current real world conditions world oil supply will almost certainly fail to match demand within two years.

The lead time to this sure and certain Oil Shock is very short, underlying the only possible solution: energy transition for reduced oil-intensity and natural gas-intensity in the OECD countries will need to start in the very short term.

Coordinated and simultaneous worldwide development of renewable and alternate low carbon energy supply is equally urgent, targeting perhaps 25 million barrels per day of oil equivalent supply by 2025. The present economic slump only buys a little more time.


Update: this essay originally read, "This is reflected by total drawdown of global oil reserves in the long period 1980-2008, about 275 billion barrels." In fact, that drawdown occurred between 1998 and 2008, not between 1980 and 2008. You can jump to the changed paragraph. - Ed.

Andrew McKillop is a writer and consultant on oil and energy economics. Since 1975 he has worked in energy, economic and scientific organizations in Europe, Asia, the Middle East, and North America. These include the Canada Science Council, the ILO, European Commission, Organization of Arab Petroleum Exporting Countries, the UN Economic and Social Commission for Asia and South Pacific, and the World Bank. He is a founding member of the Asian chapter of the International Association of Energy Economics. He is also the editor, with Sheila Newman, of The Final Energy Crisis (Pluto Press, 2005).

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By JonC (registered) | Posted April 06, 2009 at 16:32:25

An elastic response is impossible for oil as the market can't make quick changes to infrastructure or rapid changes to where food and goods are produced or where people live.

Building society on the low cost of a non-renewable resource has a predictable result (ask me how I feel about nuclear power as an alternative, hint, even more limited than oil/coal). Now the world is criss-crossed by highways and we expect a constant supply of tropical fruit and to have everything made in China on the cheap. Most people don't even consider walking or biking or even taking transit to work a possibility. You don't even see car-pooling in the midst of rush hour. Hell, SUV sales are going back up.

It's uncomfortable for individuals to consider the future, because then they might have to think about not owning as much stuff or living in the city. So the media and politicians (by and large) don't discuss it (because who likes a buzz kill) and no one is going to bother planning for the future. But when the time finally comes (and it will), society can't change itself instantly (which supply side models assume). It will take decades and as we saw not so long ago, it sure as hell doesn't take that long for the cost of oil to ratchet up.

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By LL (registered) - website | Posted April 06, 2009 at 22:47:32

Sure, the majority of people today follow the consumerism/growth paradigm like sheep. But the minority of people who are into sustainable technics, new urbanism etc. are visionaries who are going to have a disproportionate influence in coming years. Don't ever let them make you feel small! It's their own insecurities talking - especially these petty local elites.

When I read a solid analysis like this article, I'm always disappointed at the end when it talks about what "we" - meaning the institutions of global capitalism - are going to do. I'm urging people to: 1) fully acknowledge the fact that "we" have absolutely no power in these institutions, 2) consider the possibility that they are completely moribund and incompetent when it comes to matters of ecology, and 3) consider focusing on political projects for change outside of the state.

I think it's important for eco-activists to have a solid social analysis. It's fine to pan neo-liberalism. But it's also important to understand how neo-liberalism is related to capitalism as a whole.

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By A Smith (anonymous) | Posted April 07, 2009 at 11:46:12

LL, in your world where capital is in the hands of the collective, how do you know what products should be produced?

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By LL (registered) - website | Posted April 08, 2009 at 15:45:42

Naturally, demand has to be shaped and communicated by the consumers. I'm actually really excited about the revolutionary potential of consumer freedom. Some of the most vibrant projects of the grassroots-activist communities involve the democratization of consumption: food co-ops, community shared agriculture, community gardens, transit users' groups, car share co-ops, co-housing collectives, squats, social centers, non-profit bike shops, dumpster diving, Food Not Bombs... the list goes on. Some of these projects are highly developed in cities that are less conformist than Hamilton.

Possibly, this could lead to a more organized direct-democratic system on the demand side of the economy - perhaps something resembling the "consumer councils" that Michael Albert advocates in his participatory economics model.

www.zcommunications.org/zparecon/parecon.htm

I think something like that would be much more free and ecologically sustainable than either a mass market or a command economy. In capitalism, atomized individuals face highly organized institutions. Guess who has the advantage?

In 2006, capitalism spent $420 million on advertising. This is a huge allocation of resources from mostly highly centralized hierarchies to "persuade" people to do things they wouldn't otherwise do. A growing proportion of this propoganda is covert, aimed at young children, and based on the latest technologies of psychological manipulation.

I understand many people think that human freedom consists of all-out competition in the pursuit of quantitatively more stuff. I say that's the freedom of bacteria. Human freedom requires a context that's more social, rounded and qualitative. When someone "freely chooses" to drive a Hummer through downtown, this socially and ecologically harmful choice is rationalized on the basis that the individual "owns" the vehicle. The problem is that s/he doesn't "own" the air that s/he is polluting, nor the public roads on which s/he is crowding out smaller vehicles. This is "freedom" at the expense of others' freedom - not really freedom at all but domination. I say that there is a lot of that phenomenon in capitalism. That's why the demand side needs to be organized democratically. Consumption is inherently political.

In my world though? I think you're inviting me to make a utopian statement, which I have no problem with. As an anarchist-communist, in "my" world goods would be distributed communistically - "to each according to need". (Careful: "C"ommunism isn't "c"ommunism.) Thats how humans have distributed goods for most of our existence. But the praxis of trying to create a better world could unleash any number of interesting possibilities.

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By LL (registered) - website | Posted April 10, 2009 at 13:08:43

If people have any more questions about left-libertarian positions, they should check out the Anarchist FAQ

www.geocities.com/capitolHill/1931/

It's intensely researched, easy to read - a remarkable piece of literature actually.

A Smith: you should definitely check out the sections on individualist anarchism. I think the "free market anti-capitialism" of Proudhon and Benjamin Tucker are set to make a comeback with the sustainable tech and co-op movements.

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By Mr. Meister (anonymous) | Posted April 11, 2009 at 03:57:44

LL, is there or has there ever been a society without Government or Hierarchy? I cannot think of one. Seems kind of anti human nature to me. Nice theory though.

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By A Smith (anonymous) | Posted April 11, 2009 at 19:49:55

LL, this is from parecon >> "The claim of parecon is that decision making input is apportioned in proportion to degree affected by virtue of the operations of workers and consumers councils, balanced job complexes (creating the conditions necessary to participation), and self managed decision making algorithms of voting. The claim's veracity depends on the logic of participatory planning, but the attainment of the claim regarding workplace decisions in respect to relative impact on workers in the workplace, ought to be evident."

Can you tell me what this means in one sentence?

More parecon >> "But, in fact, there is no loss and is instead actually a gain in quality of decisions the closer to participatory self management we get, without, of course, wasting time seeking perfect compliance.

If that's true, then why are no major companies run by their workers?

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By nobrainer (registered) | Posted April 11, 2009 at 21:13:07

Can you tell me what this means in one sentence?

lol can you understand concepts that take more than one sentence to explain?

If that's true, then why are no major companies run by their workers?

Any why does 2/3 of the Internet run on free software designed and coordinated entirely by volunteers?

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By A Smith (anonymous) | Posted April 11, 2009 at 23:01:40

NB >> can you understand concepts that take more than one sentence to explain?

Concepts that are of value need to be clear and concise, not confusing and cryptic.

For example, what exactly does..."decision making input is apportioned in proportion to degree affected by virtue of the operations of workers and consumers councils" actually mean?

What is it about the "operations" of workers and the councils that needs to be considered? It's so vague it could mean anything?

Or how about this..."the attainment of the claim regarding workplace decisions in respect to relative impact on workers in the workplace, ought to be evident

What is so evident about it? Where is it written that workers rights supersede investors rights? Where is the evidence that backs the claim that worker run businesses are superior in producing what consumers want and need?

>> Any why does 2/3 of the Internet run on free software designed and coordinated entirely by volunteers?

Because there are people who feel the need to sacrifice themselves so that corporations like Microsoft don't make money off what they see as the electronic commune. The fact that the shareholders of Google and other corporations enjoy higher profit margins because of their anti-corporate work, is rather ironic however.

Furthermore, if a bunch of workers want to get together and provide free cars to consumers, I'm sure they will corner the market as well. However, building cars requires more than just spare time at the keyboard, so I don't think the Apache model will ever be more than an anomaly.

But please tell me why there aren't any large "worker run" companies. If they make better decisions, they should be taking market share from traditional companies, but so far that hasn't happened. Why not?

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By LL (registered) - website | Posted April 12, 2009 at 00:01:48

Mr. Meister:

Anatomically modern humans have been around 100 000 years, depending on your definition. The state only began to emerge about 8000 years ago in the Near East. So most of human existence has been stateless and without hierarchy.

(See "The Ecology of Freedom: the Emergence and Dissolution of Hierarchy" by Murray Bookchin, "The Original Affluent Society" by Marshall Sahlins, or "Fragments of an Anarchist Anthropology" by David Graeber)

As for full-scale modern examples, large parts of republican Spain were self-governed along anarchist lines from 1936 to 1939.

(I suggest "The Anarchist Collectives" edited by Sam Dolgoff or "Homage to Catalonia" by George Orwell)

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By LL (registered) - website | Posted April 12, 2009 at 00:21:30

I just want to make it clear. I'm not a "pareconist". I think there are strengths and weaknesses of that model.

A Smith raises a legitimate point. Radicals really need to focus on communication that's accessible. Nevertheless, sometimes you have to read the whole book to get what the terms mean. There's nothing wrong with that.

Balanced job complexes basically means that you're not stuck doing the same thing all the time at work. Worker and consumer councils should be self explanatory. "[D]ecision making input is apportioned in proportion to degree affected by virtue of the operations of workers and consumers councils" means you get a say according to how much you're affected. Parecon also has some really interesting things to say about remuneration for work.

I do think quality of decisions would be better in a self-managed workplace. That doesn't mean it would necessarily outcompete a capitalist corporation. In most cases, the capitalist would win because he drives his workers harder for less money. Way to be. With self-management, the goal wouldn't be winning, but meeting everybody's needs and wants on both the supply and demand side. Different ends: a better world vs. bigger, faster, more.

Can you not see how having to deal with a frickin gladiatorial battle everytime you go to work, or the market, or even try to travel from a to b - can you not see how that takes away from quality of life? Modern life doesn't have to be that way. We have enough - too much - production. It's time to spread it around and clear up the irrational contradictions.

The economics of scarcity no longer make sense. (In fact it's threatening the very survival of life on earth.) Like electronic products. They're being disseminated communistically because it makes sense to. This concrete phenomenon should make people clue in to the ideological - as opposed to scientific - nature of capitalist economics.

By the way, there is at least one large, competitive worker run corporation. That's the Mondragon Co-op in the Basque region of Spain.

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By A Smith (anonymous) | Posted April 12, 2009 at 12:37:08

LL >> With self-management, the goal wouldn't be winning, but meeting everybody's needs and wants on both the supply and demand side.

I think for many people this sounds ideal, so do you think this type of business/work arrangement is being undermined by government? If not, why do you think more people aren't organizing themselves this way?

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By grassroots are the way forward (registered) | Posted April 12, 2009 at 12:57:00

A Smith writes: What is so evident about it? Where is it written that workers rights supersede investors rights? Where is the evidence that backs the claim that worker run businesses are superior in producing what consumers want and need?

Workers Rights vs Investors Rights:

Occupational Health and Safety Act enacted 1979.

I have been taking courses in Occupational Health and Safety and had the opportunity to look at particular case, where a worker died on Nov 18, 1999.

This particular company was under the hospices of the Ministry of Natural Resources because of the product, explosives.

The Ministry of Labour had not inspected this plant in four years.

The workers were mostly middle age women, who were in constant fear of losing their low wage jobs, if they addressed any issues in relation to Health and Safety.

Under the feds, any fires were supposed to be reported, fires were almost a daily occurance, which were never reported. The new machine added to the production line, was suppose to get approval from an engineer from the Ministry of Natural Resources. The company did not get approval and the worker responsible for the implemetnation of the machine into the system did not have the requried skill in the area of electrical systems.

While the workers had the right to have a Health and Safety worker rep, under the Act, this company had no real plan in place. The company did not have accessable MSDS available as to describe the hazards in the plant. Housekeeping also played a part in the tradegy. It was an accident waiting to happen.

Under section 43(3)(a)(b)(c): A worker may refuse work or do the particular work where he or she has reason to belief that it is dangerous.

Under section 50(1)(a)(b)(c)(d), no reprisals, dismissals etc by the employer

In this particular case, it really did not matter that the employees would lose their jobs if they complained, yet it is very clearly outlined in the Act, that there will not be any reprisals on a work refusal Health and Safety Issue.

It is also disturbing that the Ministry of Labour adopted the stance they are not in the business of protecting workers safety, rather it is in the business of enforcing compliance. Yet given the product that was produced, how come the Ministry had not inspected the plant in four years?

In this case the workers rights to health and safety completely override the rights of the investors making money.

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By Mr. Meister (anonymous) | Posted April 14, 2009 at 02:30:53

LL, Stateless does not mean without hierarchy. I see a hierarchy in every human group I know or know of. The traditional family was run by the husband as long as his wife let him(if momma ain't happy ain't nobody happy). Even human partnerships have a dominant partner, and it is not based on sex. The bigger the group the more the need for a hierarchy to get things done. If you want to change the type or name of the hierarchy that is fine and call it anything you want as long as it works.

In your model goods get delivered on a basis of need. I like that idea. Who or what decides the need? Just who gets that next big screen TV? or the next bicycle? or who decides who does not eat when there is not enough food for everyone? Are you going to sit ideally by while your child goes hungry and mine eats? Like I said nice theory though.

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By LL (registered) - website | Posted April 14, 2009 at 16:26:57

Getting back to the original topic of the post, I'm convinced that a capitalistic growth economy on a global scale will unavoidably destroy itself by exceeding ecological limits. I think people who don't want a command economy imposed on them in response to crisis should aquaint themselves with the three left-libertarian principles of ecomomic organization - COMMUNISM (organizing communally and sharing), SYNDICALISM (unions geared to the goal of self-management), and MUTUALISM (the "free market anti-capitalism" of co-ops and alternative banks). The "ideals" of direct democracy and confedaralism are actually very practical for organizing from the bottom up. If it turns out that there are limits to non-hierarchical organization, then so be it. I'm fully confident it would bring benefit to working class communities.

Smith:

Historically, it's well understood (except by neo-classical economists) that the growth of capitalism and the state have been complementary processes. Look up "primitive accumulation" and aquaint yourself with the history of colonialism. Capitalists have always used the state to advance their class interests. So yes, the state is the ultimate enforcer of property and privilege.

You have to be careful though. In recent decades, the working class has also learned to use the state. Hence, the labour laws that grassroots talks about. We'll see if we've exhausted that strategy.

Also, the mutualists argue that, without state interference in the economy (war machine, transportation infrastructure, patent inforcement, etc.), the capitalists would disappear and you'd have worker self-management by default. I'm skeptical though.

But even if you could have a capitalist economy without a state, or with a minimal state, the social relations of capitalism are themselves oppressive. Do you work? If so, the next time you're at work, just look at the way people interact. Ask yourself, is this freedom?

Meister:

Lifeboat scenarios are the exception rather than the norm. If extreme scarcity to the point of starvation were to emerge here, some form of rationing would hopefully be organized. Would you rather that be done by a distant, centralized state, or a local government that you can participate in?

I'll pose a question to you. If hierarchy is such a constant in society, then what is the difference between the liberal-democracy we live under and, say, Stalinist Russia or Fascist Italy? It seems obvious to me that social forms vary in degrees of hierarchy according to how much the locals have been willing or able to resist authority.

I'm well aware of the distinction between state and hierarchy. The state is a specific form of social hierarchy, as is patriarchy, class, racism, heterosexism, gerentocracy, able-ism, etc. These forms of domination interact in endless ways. Somalia is a stateless society, but not an anarchy, despite being usually described that way in the mainstream media.

I'm glad somebody finally mentioned gender on this site. Do you know the "traditional" family you speak of - the nuclear family - is not really traditional at all, but a quite recent development? Most of human experience has been formed around extended kinship networks - clans, tribes etc. - where gift economies (ie. communism) were the norm. Political leadership (chieftains, clan mothers etc.) is often based more on influence than coercion. Child rearing among "primitives" is known to be more permissive.

I'm not advocating tribalism or primitivism. I just think you should widen your purview before making universal statements about human nature.

And before you judge me as naive, you should check out the sources I listed above. Particularly Graeber. He's an Ivy League anthropologist as well as an anarchist. The new urbanists should definitely check out Bookchin, cuz he's all about cities. Finally, I don't think anyone should make any universal statement about political economy without examining the Spanish experience from 1936-39.

Save any other questions about anarchy. I'v got to get down to my research.

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By LL (registered) - website | Posted April 14, 2009 at 16:47:04

One more thing, Meister: you're confusing hierarchy and leadership. Anarchic leadership is based on the diverse qualities of an individual group, not a frozen institutional status. An anarchist society would obviously have leadership on many levels - cultural, political, moral, artistic.

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By grassroots are the way forward (registered) | Posted April 14, 2009 at 22:24:27

LL: Syndicalism is the way forward for those in the labour movement. Direct action, not relying on a another body, like the government to protect your rights. As in my previous example, we can truly see where the law is failing workers, especially those who are not covered by a collective of workers.

The hierarchical system we have fails on many levels and it suppresses true leadership.

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By Mr. Meister (anonymous) | Posted April 15, 2009 at 00:13:26

LL, so what it boils down to is you are bored with the hierarchy we have and want to try something different since there will always be some kind of hierarchy.

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By LL (registered) - website | Posted April 15, 2009 at 14:50:41

No, meister. Try reading the words. Get a sense of process.

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By Mr. Meister (anonymous) | Posted April 17, 2009 at 13:00:46

You are the one who wanted society without hierarchy and I was just pointing out that it not possible. Like I said nice theory just absolutely no real life application.

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By Ryan (registered) - website | Posted April 17, 2009 at 15:05:59

I'm not sure it's possible to have a society without hierarchy, but I'd respectfully point out that it was once commonly held among the elevated classes that liberal democracy was a nice theory but had absolutely no real life application.

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By LL (registered) - website | Posted April 18, 2009 at 00:45:37

I'll put it more specifically. Before, during, and slightly after the American (1776) and French (1789) revolutions, the "crazy dream" of republicanism - a society without a monarch - was considered socially impossible.

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By Mr. Meister (anonymous) | Posted April 18, 2009 at 01:37:29

I am not sure what the references to past beliefs has to do with my statements. I never said any kind of government or state could not work I simply stated that human nature being what it is some form of state or hierarchy would have to exist. That is the big fly in your theory, human nature. Like I keep saying nice theory....

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By LL (registered) - website | Posted April 18, 2009 at 13:05:11

Human nature is mutable. Have you not heard of nature and nurture? It's social science 101. If every institution socializes children for hierarchy, of course you're going to see that side of human nature around you. You can't make grand claims about human nature based on the naked eye. That type of anti-intellectualism is a serious burden to debate in this country.

With this "human nature" mantra, you're starting to sound like A Smith and his "tax rates". Sometimes "common sense" is irrational. On Easter Island, it was "common sense" to cut down every tree to keep a big-head-statue competition going.

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By Mr. Meister (anonymous) | Posted April 20, 2009 at 00:52:57

You really believe people can and will change that radically in their basic approach to life? To put the welfare of the tribe above the welfare of themselves and their children and their families. To not improve their lot in life through bullying others or at others expense. To always vote, not in their own best interest but in the best interest of others. If people can, and do, then your grand ideas will certainly work and give those individuals a much better place to live than what we have today. I do not see that happening but that certainly does not mean it is impossible just highly unlikely. I just prefer to deal with more realistic ideas, things that actually have a realistic, plausible chance at occurring. It is almost impossible to prove a negative so that makes you absolutely right, it is possible...

It is also possible that some day there will be no crime, actually that would be the same day would it not? No more theft, speeding, untruths in advertising or even jaywalking. Sign me up I (and you and a whole bunch of others) am ready for your theoretical little world. I do not see it happening but it is "possible"

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