I am more concerned about the intermediate-term future of the U.S. economy today that I have been in nearly 20 years, since 1986 and 1987. At the end of the 1990s I knew the stock market was overvalued and heading for a fall, but felt that the underlying economy was sound. Now, despite the hard work of the American people and the innovation of American companies, we are vulnerable to a significant downturn in our standard of living.
The U.S. economy relies on a growing supply of oil to function, oil that we are increasingly in competition for with growing, poorer countries such as China, oil that is produced in countries that are increasingly hostile to the United States and run by undemocratic regimes that might seek to cut off the supply for political reasons, even at some cost to themselves. Meanwhile, the economy has kept afloat by consumer spending financed not by money earned but by growing personal and national debts, often borrowed against home values, also financed by countries abroad. This cannot continue indefinitely. While excess consumption of consumer goods is in part to blame for this, America is increasingly going into debt to pay for necessities, energy in particular.
The rising cost of energy, particularly gasoline, has strained household budgets, particularly for the less well off. Most Americans, however, have no choice but to keep paying and driving, because most live in places where other alternatives are not available, and drive vehicles purchased when gasoline was cheaper and fuel economy not a priority. If ever China and other countries felt the need to improve their position in the competition for oil, all they would have to do is stop financing our debts, causing the dollar to plummet in value. Americans would struggle to bid for oil with even more, diminished dollars while other nations paid more easily with stronger currencies.
How did we get in this mess?
Someone arriving from Mars might conclude that 25 years of shortsighted self-indulgence, with no concern with energy efficiency and alternate sources of power, had something to do with it. Indeed, after energy efficiency soared, alternative energy drew attention, in the aftermath of the 1970s oil shocks, OPEC dramatically increased production and cut prices. Americans dropped energy efficiency and alternative energy and indulged themselves with cheaper, easier power. Even today, OPEC warns investors not to invest in alternatives, because if they ever appear likely to work, oil-producing countries would cut the price of oil again and put the alternatives out of business. People purchased SUVs that burn more gasoline and moved to McMansions on the exurban fringe. That increased the demand for energy and pushed up the price — for everyone.
Since our politicians are not from Mars, however, they are pretending something else has happened. If Republican, they blame the environmentalists and their rules, without whom U.S. production, they imply, would have soared and met all our needs at lower prices. It could be cheap and easy, they say. If they are Democrats, the blame falls on oil companies, which could provide all the oil we need at much lower prices if they weren’t “gouging.” It could be cheap and easy, they say. The entire public response to the growing energy crisis has been an attack on environmental rules and the oil companies. That, and reductions in taxes on gasoline, which only serve to keep the demand for gasoline higher than it would otherwise be reducing the personal benefit of reducing consumption, all a the cost of having less money available to maintain the infrastructure. That is what The State of New York did. Even the federal Congress, which had debated enacting either an offsetting cut in other taxes or a rebate to limit the damage of higher energy prices, while still keeping energy taxes that provide an incentive to conserve in place, knew enough not to do something that stupid.
No politician dares to suggest that people change their behavior in order to reduce energy use, or pay more now to support alternatives that will be cheaper in the long run. That is because our politicians know that all of us have glands emitting hormones sending chemical messages to our brains. Although they differ in the details, basically come down to “I want for me now!” And they know that a force more powerful than either political party or religion or anything else in our society, the advertising industry, has for 50 years been tapping into those messages to convince us that answering the chemical call with ever more spending on ever more goods and services that require ever more energy is the only way to be happy. And our politicians know that opposing those messages is virtually the only way an incumbent politician can lose an election. The Democrats, who one might thought would have taken the lead on this issue, have been cowed by the threat of being accused of planning a 50 cent a gallon tax on gasoline. Meanwhile, encouraged by cheap gas, Americans have bought enough SUVs to drive the cost of gasoline up by $1.50 per gallon.
We don’t have leaders in public office. We have deal cutters, who stay in place be distributing short term benefits to individuals and groups in on the deals, while telling everyone else that there is no price to be paid for anything. Not for more spending. Not for tax cuts. Not for the War on Terror. Not for economic and energy security, and the environment.
Which brings us to a question: what is leadership?
Human beings are social animals. While all of us have those chemical messages telling us to be selfish, many of us have other aspects of our personality pushing us to cooperate for mutual benefit. Families could not exist without that impulse. Communities couldn’t either. Even the conduct of business relies, to a great extent, on the presence of trust. But even those of us who want to cooperate don’t want to be played for suckers, modifying our behavior to benefit others only to have those others use us as tools for their own ends. That tension is always present.
A leader is someone we can trust to protect those who cooperate from exploitation by those who do not, and who can therefore challenge us to cooperate and get a response. Our deal cutters haven’t dared to enact legislation to force people to change their behavior to take the long-term energy effects of their choices into account. Leaders might not even have to force people, because they are able to convince people in addition to, or even aside from, legislation. Unfortunately, there is no leadership on energy in the United States.