Post Capitalism Thinking Green: Taxing Carbon

The drop in gasoline prices reflect the sudden and profound down turn in economic activity. We know that all stock-markets lost, but are there any winners in the situation ? Are there any signs that earth itself may be able to take a small breather ? Is there a way now to stimulate a green economy while discouraging more carbon dependency while reconfiguring the economy --all at the same time ?

Instead of spending any more bailout billions in artificially supporting some kind of imaginary status quo (and thereby dialectically & randomly disrupting that very 'idee fixe'), let’s take a moment, and with the eye of a samurai, examine where the ‘martial opportunities’ of the situation are.

Why should taxpayers' money be used to buy 'toxic assets' or support the banks and bankers that created them ? If the tax payers are asked to invest 700 billion (and now so much more ...it is up to 7.6 trillion, no --that was yesterday... it is now up to over 8.6 trillion, etc. --who's counting anyways??), shouldn't they first buy up majority shares in companies that do make money? How about Exxon-Mobil, the largest corporation in the world with an estimated value of 350 billion or so and a profit in 2007 of more than 40 billion --profit margin a stunning 24%.

(Puny amount of money when you come to think about it now..... after all we've been through...hell.....even the Iraqi war is starting to look cheap). 

If we were to start with buying Exxon Mobile, then would be able to finance any bailouts with the tax base that this would provide.

Instead of these colossal oil industries privatizing our government and putting three of their employees in charge (Bush, Cheney and Rice), the US government should nationalize the oil companies by owning controlling shares in them. Far fetched you say ? Not really... look at our nemesis that are faring at least somewhat better. Russia under Putin, and Venezuela under Chavez did just that: they nationalized oil and oil pays a large chunk of the tax base of both countries. That is why guys like Putin and Chavez are still popular and Bush has become a dead duck.

Same with the car industry: Instead of a dead end loan to the big 3, let's buy majority shares into them (at almost no costs since share prices almost hit the zero mark), kick the lame CEO’s out, and start defining the kind of cars we need for our future with the brightest of minds and think tanks and then.... start making them! That would be a labor intensive green solution to our transportation problems. If government invests in a company, it must be willing to have controlling interests, and create the economic climate to succeed.

The reality is that in the post capitalist era we are entering now, America is starting to look like China, with plenty of government planning and intervention, and a disproportionate influence of the army on economy and policy making. Whereas China is on this path already for a long time now, in the US, we come to this point suddenly, under the duress of giant Ponzi schemes and capitalism run amuck in its own orgy of delusions and greed.

In that sense it is interesting to compare the reactions of China, Russia and US to their respective economic slowdowns, and examine the financial medicines that have been prescribed in each case.  

The Chinese package ($849 billion) is expected to focus overwhelmingly on construction. A statement by China's State Council said the money would be spent on 10 projects including low-income housing, rural infrastructure, water, electricity, transportation, the environment, technological innovation and rebuilding from disasters.  So China is betting on a large investment into infrastructure.Putin has announced that Russia will have its own program: prioritizing tax cuts, protecting savings and real estate investments and increased spending on social programs.  

We will see what comes of all this but the point here is that both of these plans sound very different from a bailout of toxic assets and paper shuffling banks. They sound like long term investments into the well being of the Chinese and Russian people and economy.  How do they plan to pay for all of that ? In China's case its sovereign fund has an estimated $200 billion in savings, all provided by the communist party. Of course, China could also sell the hundreds of billions of dollars in debt that it owns to fund its stimulus programs. Though nobody is talking about this option it will surely affect the beneficiary of all of these loans namely the US. (By the way, in our estimate every man woman and child in the US is already about 35.000 dollars each in debt).

Russia too has amassed under Putin significant savings and reserves (mainly due to Russia's oil grab).  They will give Russia the freedom to maneuver  and allow for certain amount of macro economic stability. 

How it the US going to pay for its bailout ? Well.... pause....well...hum-mm, let's see ... we are terribly in debt (to China among others), our military is way over stretched and it doesn't look like we are going to control the oil in Iraq and the Middle East any time soon, like our oiligargy had originally intended. Where are the sources of true investments that America can make ? What is left?

Remember what I just said about buying and nationalizing Exxon Mobil ? Forget it --it is never going to happen --just joking. Thomas Friedman has come up with the second best scenario. In his column "Win win win win win" Friedman writes:
Obama is coming in with enormous popularity. This is his best window of opportunity to impose a gas tax. And he could make it painless: offset the gas tax by lowering payroll taxes, or phase it in over two years at 10 cents a month. ......

The two most important rules about energy innovation are: 1) Price matters — when prices go up people change their habits. 2) You need a systemic approach. ....As long as gas is cheap, people will go out and buy used S.U.V.’s and Hummers......There has to be a system that permanently changes consumer demand, which would permanently change what Detroit makes, which would attract more investment in battery technology to make electric cars, which would hugely help the expansion of the wind and solar industries ....... A higher gas tax would drive all these systemic benefits.

The same is true in geopolitics. A gas tax reduces gasoline demand and keeps dollars in America, dries up funding for terrorists and reduces the clout of Iran and Russia at a time when Obama will be looking for greater leverage against petro-dictatorships. It reduces our current account deficit, which strengthens the dollar. It reduces U.S. carbon emissions driving climate change, which means more global respect for America. And it increases the incentives for U.S. innovation on clean cars and clean-tech.....

Right on! Thomas Friedman --I may not have always agreed with you in the past, but this time you got it right, like Michael Mandelbaum pointed out: People don't change when you tell them there is a better option. They change when they conclude that they have no other option.... A gasoline tax would do more for American prosperity and strength than any other measure Obama could propose...