Monday, April 22, 2013

Why the ‘Spreadsheet Scandal’ Should Kill Obama’s Social Security Cut

A recent “Spreadsheet Scandal” has rocked the economics world. It also seems to have eliminated the last remaining technical argument in support of the President’s “chained CPI” Social Security cut.
Not weakened it. Eliminated it.
I believe the President proposed the chained CPI in good faith. I don’t know if the same can be said about his campaign pledges on that subject, but I think he genuinely believed these cuts were needed. I think his economic advisors thought they were doing the right thing by proposing them.  And I think that this now-discredited spreadsheet helped convince them.
Why do I think so? Because I had a run-in with the President’s top economic official on this very subject back in 2010, and his position seemed to be strongly influenced by that spreadsheet and the economists who created it.
I hadn’t thought about that exchange for a long time. But last night I was catching up on this scandal when it struck me:
That’s why they’re doing this.
Shallow Background
I first learned of the Administration’s plans to cut Social Security in a deep-background briefing which a “Senior Administration Official” held for a small group of writers in August of 2010.
I honored the “deep background” (no quotes or names) commitment, but Mike Allen of Politico did not.  Allen wrote that the unnamed Official believes that “action on Social Security … demonstrates the ability to begin to affect the long-run deficits … strengthens the odds of a political consensus behind other spending cuts or tax increases … (and) would establish more CREDIBILITY with the MARKETS.”
Some of the other attendees were outraged at what they considered Allen’s unfair reporting.  Tim Fernholz said Allen failed to note that the Official had cited Paul Krugman. (More about that shortly.)  But the shift-key-abusing Allen was right on this one.
Then the Washington Post revealed that the unnamed official was Treasury Secretary Tim Geithner. Several other attendees did the same. So much for “deep background” …
The Secretary
Those Social Security comments were part of a heated exchange with me. It took place after we were told that some form of Social Security cut was likely, probably after a “bipartisan” recommendation from the Simpson/Bowles Deficit Commission.
What if the Commission deadlocks? I asked.
Then the recommendation will come from a bipartisan subgroup, came the answer. If we can’t get that we’ll get a bipartisan recommendation from the two co-chairs themselves. (That’s what eventually happened.)
I asked why they wanted these cuts. Because the international markets want them, was the reply. But the international bond markets love US government debt right now, I said.
That’s when things got heated.
Social Security adds to government debt, said the (as yet unnamed) official.
But, I said, the Social Security Act forbids it from drawing down on general funds and adding to the debt. It’s a creditor, not a …
He cut me off.  Even your hero agrees with me, he said.
Who?
Paul Krugman.  Your hero Krugman agrees that Social Security spending is categorized as government spending.
He’s talking on a macro level, I began. But –
The Official cut me off again, turned away and said, Next question.
The 90 Percent Solution
Here’s why that exchange matters: The most powerful economic official said in 2010 that a Democratic President needed to cut Social Security, even though it doesn’t contribute to Federal debt, because Social Security payments are classified on the books as “government spending.”
That troubled him because of a policy panic fueled in large part by that now-discredited spreadsheet. That spreadsheet didn’t distinguish between “trust fund” expenditures like Social Security and other forms of spending and debt. It said that things fall apart when aggregate “government debt” crossed a certain line.That would presumably make that nation a poor place to invest, which was the source of Geithner’s concern.
Those conclusions came from a paper published earlier that year by Carmen Reinhart and Ken Rogoff. Reinhart and Rogoff argued that one number represented a kind of tipping point beyond which government debt became a destructive drag on the entire economy.
That number was 90 percent. Once the ratio of government debt to annual GDP reaches or passes it, wrote Reinhart and Rogoff, the economy shrinks. What bond investor in his right mind would invest in a government whose economy is about to shrink?
No wonder the Treasury Secretary was concerned. At the time of our meeting, the Federal debt was 100 percent – and rising.
The Scandal
But they were wrong. Thomas Herndon, Michael Ash, and Robert Pollin analyzed their original Excel spreadsheet and discovered a simple and significant calculation error. When it was corrected, the 90 percent number became meaningless. Not just misinterpreted, as many people felt Reinhart and Rogoff had done at the time, but meaningless.
Paul Krugman – my “hero” – has a good writeup on this. Mike Konczal has an excellent overview.  There’s more, including what appears to be some cherry-picking of information to support their thesis, but the bottom line is: The 90 percent red-line means nothing. Nothing happens when it’s crossed.
For the anti-government austerity crowd, however, the 2010 Reinhart/Rogoff paper was the right argument at the right time. They ignored economists like Josh Bivens, John Irons, and Dean Baker, who expressed doubts.
The new findings by Herndon, Ash, and Pollin are a very important story. I followed it with great interest, but didn’t think I had anything to add to it.
Then I remembered that Senior Administration Official.
Article of Faith
He was looking at figures which showed Federal debt well above that “red line” – and going up, not down.
That’s panic time, if you believe Reinhart and Rogoff. I didn’t then, and I certainly don’t now. But the Administration did. I can imagine where that led them.
Social Security self-funded payments don’t contribute to that debt, but it’s a very big program. This year’s outlays will come to nearly 5 percent of our total GDP.  And the Federal government owes the Social Security Trust Fund (and therefore all its current and future recipients) more than two trillion dollars.
If you’re panicked over government debt and genuinely believe it will eventually sink the entire economy, you’ll want to cut those large Social Security payments. You’ll want to do everything you can to reassure investors that you’re addressing the debt, and you’ll want to start with the big numbers first.
If you’re up above the Reinhart/Rogoff “red line,” where terror sets in, you’ll want to raid the Social Security Trust Fund too. (To be fair, the Administration never explicitly said that it would, but that’s what behind all those “they’re only IOUs” arguments.) If the Trust Fund’s money is used to pay down other debt, you can panic a little less.
And you’ll do all of this with the firm conviction that you’re acting in the country’s best interests.
That Treasury Department meeting took place August 2010, eight months after the “90 percent” figure was published. It had already become an article of faith in Washington DC.
Math as Mantra – and Absolution
But why did it catch on?
The alien-hunting Agent Mulder on The X-Files had a poster which read, “I Want to Believe.” In the policy world, numbers can take on a magical aura. They can make ideologically-driven decisions look like the unbiased conclusions of wise technocrats. Your conscience need trouble you no longer, however harsh your deeds. It’s no longer your fault.
The numbers told you to do it.
Reinhart and Rogoff offered the policy world a magic number which absolved them of responsibility or sin.  A typical reaction came from Peter Orszag, who was President Obama’s Director of the Office of Management at the time.  “I don’t think it’s too much of an exaggeration to say that everything follows from missing the call on Reinhart-Rogoff,” said Orszag in 2011. “I didn’t realize we were in a Reinhart-Rogoff situation until 2010.”
We now know that Reinhart and Rogoff offered myth, not math. And today the whole world’s in a “Reinhart-Rogoff situation” as it suffers the financial after-effects of their negligent numerology.
(Well, not the whole world. Orszag became “Vice Chairman of Corporate and Investment Banking, Chairman of the Public Sector Group, and Chairman of the Financial Strategy and Solutions Group” at the bailed-out megabank Citigroup. Sounds like a pretty austerity-proof gig.)
Among the Believers
If you believe in Reinhart and Rogoff’s magic number, you’ll come to believe that Social Security is unsustainable. You’ll think that its legal protections are merely an inconvenience. You’ll eventually conclude that the government must welsh on its debt to the Social Security Trust Fund – and to all of its future beneficiaries – to prevent a catastrophe.
You’ll oppose lifting the payroll tax cap to shore up Social Security, even though it fixes most actuarial problems, because that doesn’t address the Reinhart/Rogoff number. Neither does a financial transaction tax.
You’ll oppose increasing benefits and raising taxes for everyone, too, even though voters across the political spectrum say they’re willing to pay more in return for better benefits. But that doesn’t move the 90 percent “red line” either.
You’ll have very little patience for arguing with economic writers you perceive as left-wing and “ideological.” You’ll think to yourself, Hasn’t this guy read Reinhart and Rogoff? And you’ll turn away. Among the “147 people” you know, the people you really know, you’d get a lot of support and praise for hanging tough against these diatribes from uninformed outsiders.
You’ll tell yourself that the people giving you a hard time don’t understand: You’re doing it for them. You’ll tell yourself it’s hard to be a leader, hard to make the tough choices, hard to take the heat for doing the right thing.
A lot of people will say it for you, too, over cocktails or a good meal. Al Simpson will say it. Pete Peterson will say it. Bill Clinton will say it. The defense contractors and too-big-to-fail bank CEOs behind Fix the Debt will say it.
They’ll all say it. You’ll believe it.  If …
If you believe in Reinhart and Rogoff’s number. But it’s been disproved. What now?
A Test of Character
I don’t think the President and his advisors have been acting out of undiluted cynicism and venality. I think they believed these cuts were needed. I think they were swayed by the pro-austerity biases of the people in their social bubble, then seduced by Reinhart and Rogoff’s bad math.
But Europe’s experience has proved that austerity doesn’t grow economies. It hurts them. We now know that austerity increases, rather than reducing, government deficits in times like these. New studies like the Bureau of Labor Statistics’ “CPI-E” indicate that that the chained CPI is a move in the wrong direction. And now Herndon et al. have conclusively disproved Reinhart and Rogoff’s findings.
There’s nothing left.
One could argue that the Senior Administration Official’s argument was only partly based on Reinhart and Rogoff. But The Official was fixated on lower debt as a percentage of GDP. That’s pure Reinhart/Rogoff. And we now know they gave the world bad information. It’s clear that their inaccurate paper fueled and amplified a debt panic among leaders and advisors in both parties, and helped turn the tide in favor of austerity.
This new revelation undercuts the last remaining technical argument in favor of the chained-CPI benefit cut (which also includes a middle-class tax hike.) The White House and this President now face a test of character: Will they change their position in the face of new information?
That’s a question only they can answer.
Postscript: How Should a Naked Economist Behave?
I initially felt both sympathy and empathy toward Reinhart and Rogof, despite their arguments. If you’ve ever calculated large numbers for a living you’ll know what I mean. They’re living your worst fear, the one that fuels a flop-sweat feeling in the pit of your stomach: Did I get the math right? Did I double-check the figures enough?
It’s like those children’s nightmares where they show up in school and then realize that they’re naked.
But there’s a protocol for this sort of nakedness.  You acknowledge your error immediately, and then work on correcting you error’s impact on your corporation, your organization or your community (which, in Reinhart and Rogoff’s case, is pretty much the entire planet).
Bu, as Krugman points out, they responded instead with disingenuous arguments that reflect very poorly on themselves.  Meanwhile, the story has exploded around the world’s economic circles: “How an Excel error fueled panic over the Federal debt,” wrote Michael Hiltzik in the Los Angeles Times.
Reinhart and Rogoff should do what others in their position usually do: Own up and make things right. Think of it as a debt - one they owe their profession, their country, and their world. It’s what they should have done immediately.
They can still do it. The White House can do it too. It’s not too late – yet.

American Democracy In Shambles

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With the imposition of a state of siege in Boston, a historical threshold has been crossed. For the first time ever, a major American city has been placed under the equivalent of martial law. The already frayed veneer of a stable democracy based on constitutional principles is in shreds.
On Monday, April 15, two bombs exploded near the finish line of the Boston Marathon in the city’s center. Three people were killed and over 170 were injured, some seriously. This was a criminal act with tragic consequences. But violence, including acts of mass homicide and disasters resulting in major loss of life, is a regular feature of American society. Even as the events in Boston were unfolding, a factory explosion in Texas, to all appearances linked to safety hazards, took far more lives than the bombs detonated at the end of the marathon.
There is no precedent for the massive mobilization of military, police and intelligence forces carried out April 19 in Boston and its environs, which encompass more than 1 million people. Thousands of heavily armed police and National Guard troops occupied the streets, backed up by machine gun-mounted armored vehicles, Humvees and Black Hawk helicopters. As the WSWS noted, the scene resembled the US occupation of Baghdad.
The people were told to remain indoors while police, with automatic weapons drawn, conducted warrantless house-to-house searches. Some of those who strayed out of doors were surrounded by police and ordered to go home. The mass transit system was shut down; passenger train service along the northeastern corridor was halted; businesses, universities and other public facilities were closed.
Boston—the cradle of the American Revolution, one of the most liberal cities in one of the most liberal states in the US, the country’s premier center of higher education—was turned into an armed camp. This staggering mobilization of federal, state and local police power was deployed to track down a 19-year-old youth.
So far, there has been no protest from within the political or media establishment to the lockdown.
Following the capture of alleged bomber Dzhokhar Tsarnaev, President Obama issued a late-night statement from the White House in which he stressed the role of his administration in the police-state mobilization, boasting that he had “directed the full resources of the federal government…to increase security as needed.” Ignoring the presumption of innocence, he referred to the captured suspect and his dead brother as “these terrorists.”
Obama’s Justice Department quickly announced that it would not read the suspect his “Miranda right” to remain silent and obtain legal counsel before speaking to police investigators. It would instead question the seriously injured youth “extensively” not just on matters related directly to public safety, but more broadly on “intelligence matters.” This sets a precedent for denying these rights to anyone arrested under antiterrorism statutes, which, under Obama, has already included political dissidents such as Occupy Wall Street and anti-NATO protesters.
Encouraged by the police-military mobilization, Republican senators Lindsey Graham and John McCain and New York Congressman Peter King, all of whom have close ties to the military and intelligence agencies, demanded that Tsarnaev be declared an enemy combatant and turned over to the military.
The events in Boston have laid bare the modus operandi for the establishment of dictatorial forms of rule in the US. One or another violent act carried out by disoriented or disaffected individuals, perhaps with the help of elements within the state, is declared a terrorist event. A state of siege is imposed suspending democratic rights and establishing military-police control.
So deeply implicated are all of the organs of the state in these plans that little in the outer trappings of political life would have to be changed. It would not be necessary to overthrow the president or shut down Congress. These institutions would readily play their assigned role, and the imposition of a military dictatorship would be sanctioned by the US Supreme Court.
The media would simply continue to do what it normally does—functioning as a de facto arm of the state and providing the necessary pretexts, while whipping up the requisite fear and panic within the public.
The very fact that the entire establishment agrees that democratic norms cannot be maintained in the face of violence by a handful of people testifies to the advanced stage of the breakdown of American democracy.
So disproportionate was the scale of the response to the actual level of the threat that the conclusion cannot be avoided that the Boston bombings were the pretext for, not the cause of, the lockdown. The police-state mobilization was the culmination of more than a decade of intensive planning and the ceaseless buildup of the repressive forces of the state since 9/11, carried out under the cover of the “war on terror.”
The operation is not an expression of strength or confidence on the part of the American ruling class. On the contrary, it reflects the near panic of the corporate-financial elite in the face of mounting social discontent, exacerbated by extreme nervousness over the precarious state of global financial markets. What haunts the ruling class is not the fear of a terrorist attack, but dread of a new financial collapse, with the likely consequence of massive social upheavals.
The breakdown of American democracy has profound causes, the first of which is the staggering level of social inequality. Democracy cannot be maintained when the richest 5 percent of the population controls over 60 percent of the wealth. In the moves to police-military dictatorship, the forms of rule are coming into conformance with the underlying social reality of American capitalism.
Another fundamental cause of the crisis of democracy is the eruption of US militarism. The power of the military/intelligence apparatus has grown immensely, particularly since the end of the Soviet Union, as the American ruling class has turned to military aggression as a means of offsetting the decline in its global economic position. The professional military, segregated from society at large and hostile to it, has acquired ever-greater influence over political affairs and civilian authority. As always, imperialist war is incompatible with democracy.
American liberalism as a distinct political tendency has ceased to exist. The lining up of the Democratic Party behind the “war on terror,” and the external aggression and internal repression carried out in its name, has made clear that there is no section of the ruling elite that will defend democratic rights. The Obama administration, which has expanded the right-wing, antidemocratic policies of the Bush administration, is without question the most reactionary in US history.
As always, the filthiest role is played by the media and its leading personnel. From day one, they turned the airwaves into a continual rumor mill, making one unsubstantiated claim after another in an effort to sow fear and panic and justify the police-state measures being taken. They readily agreed to self-censor their reports in accordance with the demands of the police agencies. As CNN anchor Chris Cuomo, son of the former Democratic governor of New York and brother of the state’s current governor, told viewers, “We’ve only been showing the feeds that authorities are comfortable with.”
The media seeks to create an aura of popular support for martial law-type measures. But the initial confusion will give way to mounting disquiet. The abrupt shift in the forms of rule will create opposition in the population, above all in the working class.
The appropriate conclusions need to be drawn. Social inequality and war—the inevitable outcome of capitalism—are incompatible with democracy. One or the other—capitalism or democracy—must go. That is the issue confronting the working class.

Analysis Finds 55% Ground Beef, 39% Chicken Contaminated with Superbugs

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Would you still eat that turkey burger if you knew it contained antibiotic resistant bacteria? Maybe not. But if you eat turkey, there’s a good chance you are ingesting some of these potentially lethal “super bugs”. The same holds true for beef, chicken, and pork, according to a recent analysis from the Environmental Working Group.
The EWG analyzed tests recently released from the federal government, and what they found was that a great deal of American meat is contaminated with antibiotic-resistant bacteria. More specifically, the EWG found the following contamination levels:
  • 81% of raw ground turkey
  • 69% of pork chops
  • 55% of raw ground beef
  • 39% of raw chicken
With the vast majority of U.S.-made pharmaceuticals going into livestock production, how could this possibly be? It’s because the superbugs are created in part by an overabundance of antibiotics. Sounds a little backwards, right? Well, bacteria are living things; they evolve and change to survive just like humans or animals do. And to this end, when something threatens them, they adjust to build defenses. This is how powerful bacteria become impervious to potent antibiotics.
MedicalNewsToday reports that 30 million pounds of antibiotics were sold in 2011. This marks an increase of 22% since 2005. And somewhere around 80% of those drugs went to meat production. As we pump more and more antibiotics into the food system, we will likely see a greater concentration, variety, and fallout of these superbugs.
The EWG says the source of the problem isn’t being addressed. The cause of proliferation of illness and bacteria among livestock is largely the conditions in which we raise them. In other words, large scale feeding operations where cattle, chicken, and other livestock are forced to live on top of each other in their own filth certainly does nothing to encourage healthy animals.
“Congress should also fully fund the Conservation Stewardship Program, which encourages conservation activities on grassland, pastureland and rangeland. This program, run by the U.S. Department of Agriculture, could be used to support ranchers who raise animals on pasture and employ practices that fortify health.
For example, unlike operations that confine a large number of animals to a small area, rotational grazing allows animals access to open space. This practice improves herd health and reduces the risk of infection or sickness that would otherwise spread easily,” the Environmental Working Group reports.
Antibiotic resistant superbugs found in livestock can and will make their way into humans. One already has. Known as Pig MRSAMethcillin-resistant Staphoylococcus aureus CC398 is no longer just for pigs. That having been said, if you knew your turkey burger was infected with a “superbug”, would you still eat it?
Until the issue is addressed, it’s important to consider limiting meat consumption. Some farmers are doing their part by not only being independent from large-scale CAFO’s, but also by replacing antibiotics with natural substances like cinnamon and oregano oil.

How Resource Scarcity and Climate Change Could Produce a Global Explosion

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Brace yourself. You may not be able to tell yet, but according to global experts and the U.S. intelligence community, the earth is already shifting under you.  Whether you know it or not, you’re on a new planet, a resource-shock world of a sort humanity has never before experienced.

Two nightmare scenarios -- a global scarcity of vital resources and the onset of extreme climate change -- are already beginning to converge and in the coming decades are likely to produce a tidal wave of unrest, rebellion, competition, and conflict.  Just what this tsunami of disaster will look like may, as yet, be hard to discern, but experts warn of “water wars” over contested river systems, global food riots sparked by soaring prices for life’s basics, mass migrations of climate refugees (with resulting anti-migrant violence), and the breakdown of social order or the collapse of states.  At first, such mayhem is likely to arise largely in Africa, Central Asia, and other areas of the underdeveloped South, but in time all regions of the planet will be affected.

To appreciate the power of this encroaching catastrophe, it’s necessary to examine each of the forces that are combining to produce this future cataclysm.

Resource Shortages and Resource Wars

Start with one simple given: the prospect of future scarcities of vital natural resources, including energy, water, land, food, and critical minerals.  This in itself would guarantee social unrest, geopolitical friction, and war.

It is important to note that absolute scarcity doesn’t have to be on the horizon in any given resource category for this scenario to kick in.  A lack of adequate supplies to meet the needs of a growing, ever more urbanized and industrialized global population is enough.  Given the wave of extinctions that scientists are recording, some resources -- particular species of fish, animals, and trees, for example -- will become less abundant in the decades to come, and may even disappear altogether.  But key materials for modern civilization like oil, uranium, and copper will simply prove harder and more costly to acquire, leading to supply bottlenecks and periodic shortages.

Oil -- the single most important commodity in the international economy -- provides an apt example.  Although global oil supplies may actually grow in the coming decades, many experts doubt that they can be expanded sufficiently to meet the needs of a rising global middle class that is, for instance, expected to buy millions of new cars in the near future.  In its 2011World Energy Outlook, the International Energy Agency claimed that an anticipated global oil demand of 104 million barrels per day in 2035 will be satisfied.  This, the report suggested, would be thanks in large part to additional supplies of “unconventional oil” (Canadian tar sands, shale oil, and so on), as well as 55 million barrels of new oil from fields “yet to be found” and “yet to be developed.”

However, many analysts scoff at this optimistic assessment, arguing that rising production costs (for energy that will be ever more difficult and costly to extract), environmental opposition, warfare, corruption, and other impediments will make it extremely difficult to achieve increases of this magnitude.  In other words, even if production manages for a time to top the 2010 level of 87 million barrels per day, the goal of 104 million barrels will never be reached and the world’s major consumers will face virtual, if not absolute, scarcity.

Water provides another potent example.  On an annual basis, the supply of drinking water provided by natural precipitation remains more or less constant: about 40,000 cubic kilometers.  But much of this precipitation lands on Greenland, Antarctica, Siberia, and inner Amazonia where there are very few people, so the supply available to major concentrations of humanity is often surprisingly limited.  In many regions with high population levels, water supplies are already relatively sparse.  This is especially true of North Africa, Central Asia, and the Middle East, where the demand for water continues to grow as a result of rising populations, urbanization, and the emergence of new water-intensive industries.  The result, even when the supply remains constant, is an environment of increasing scarcity.

Wherever you look, the picture is roughly the same: supplies of critical resources may be rising or falling, but rarely do they appear to be outpacing demand, producing a sense of widespread and systemic scarcity.  However generated, a perception of scarcity -- or imminent scarcity -- regularly leads to anxiety, resentment, hostility, and contentiousness.  This pattern is very well understood, and has been evident throughout human history.

In his book Constant Battles, for example, Steven LeBlanc, director of collections for Harvard’s Peabody Museum of Archaeology and Ethnology, notes that many ancient civilizations experienced higher levels of warfare when faced with resource shortages brought about by population growth, crop failures, or persistent drought. Jared Diamond, author of the bestsellerCollapse, has detected a similar pattern in Mayan civilization and the Anasazi culture of New Mexico’s Chaco Canyon.  More recently, concern over adequate food for the home population was a significant factor in Japan’s invasion of Manchuria in 1931 and Germany’s invasions of Poland in 1939 and the Soviet Union in 1941, according to Lizzie Collingham, author of The Taste of War.

Although the global supply of most basic commodities has grown enormously since the end of World War II, analysts see the persistence of resource-related conflict in areas where materials remain scarce or there is anxiety about the future reliability of supplies.  Many experts believe, for example, that the fighting in Darfur and other war-ravaged areas of North Africa has been driven, at least in part, by competition among desert tribes for access to scarce water supplies, exacerbated in some cases by rising population levels.

“In Darfur,” says a 2009 report from the U.N. Environment Programme on the role of natural resources in the conflict, “recurrent drought, increasing demographic pressures, and political marginalization are among the forces that have pushed the region into a spiral of lawlessness and violence that has led to 300,000 deaths and the displacement of more than two million people since 2003.”

Anxiety over future supplies is often also a factor in conflicts that break out over access to oil or control of contested undersea reserves of oil and natural gas.  In 1979, for instance, when the Islamic revolution in Iran overthrew the Shah and the Soviets invaded Afghanistan, Washington began to fear that someday it might be denied access to Persian Gulf oil.  At that point, President Jimmy Carter promptly announced what came to be called the Carter Doctrine.  In his 1980 State of the Union Address, Carter affirmedthat any move to impede the flow of oil from the Gulf would be viewed as a threat to America’s “vital interests” and would be repelled by “any means necessary, including military force.”

In 1990, this principle was invoked by President George H.W. Bush to justify intervention in the first Persian Gulf War, just as his son would use it, in part, to justify the 2003 invasion of Iraq.  Today, it remains the basis for U.S. plans to employ force to stop the Iranians from closing the Strait of Hormuz, the strategic waterway connecting the Persian Gulf to the Indian Ocean through which about 35% of the world’s seaborne oil commerce  passes.

Recently, a set of resource conflicts have been rising toward the boiling point between China and its neighbors in Southeast Asia when it comes to control of offshore oil and gas reserves in the South China Sea.  Although the resulting naval clashes have yet to result in a loss of life, a strong possibility of military escalation exists.  A similar situation has also arisen in the East China Sea, where China and Japan are jousting for control over similarly valuable undersea reserves.  Meanwhile, in the South Atlantic Ocean, Argentina and Britain are once again squabbling over the Falkland Islands (called Las Malvinas by the Argentinians) because oil has been discovered in surrounding waters.

By all accounts, resource-driven potential conflicts like these will only multiply in the years ahead as demand rises, supplies dwindle, and more of what remains will be found in disputed areas.  In a 2012 study titledResources Futures, the respected British think-tank Chatham House expressed particular concern about possible resource wars over water, especially in areas like the Nile and Jordan River basins where several groups or countries must share the same river for the majority of their water supplies and few possess the wherewithal to develop alternatives.  “Against this backdrop of tight supplies and competition, issues related to water rights, prices, and pollution are becoming contentious,” the report noted.  “In areas with limited capacity to govern shared resources, balance competing demands, and mobilize new investments, tensions over water may erupt into more open confrontations.”

Heading for a Resource-Shock World

Tensions like these would be destined to grow by themselves because in so many areas supplies of key resources will not be able to keep up with demand.  As it happens, though, they are not “by themselves.”  On this planet, a second major force has entered the equation in a significant way.  With the growing reality of climate change, everything becomes a lot more terrifying.

Normally, when we consider the impact of climate change, we think primarily about the environment -- the melting Arctic ice cap or Greenland ice shield, rising global sea levels, intensifying storms, expanding deserts, and endangered or disappearing species like the polar bear.  But a growing number of experts are coming to realize that the most potent effects of climate change will be experienced by humans directly through the impairment or wholesale destruction of habitats upon which we rely for food production, industrial activities, or simply to live.  Essentially, climate change will wreak its havoc on us by constraining our access to the basics of life: vital resources that include food, water, land, and energy.  This will be devastating to human life, even as it significantly increases the danger of resource conflicts of all sorts erupting.

We already know enough about the future effects of climate change to predict the following with reasonable confidence:

* Rising sea levels will in the next half-century erase many coastal areas, destroying large cities, critical infrastructure (including roads, railroads, ports, airports, pipelines, refineries, and power plants), and prime agricultural land.

* Diminished rainfall and prolonged droughts will turn once-verdant croplands into dust bowls, reducing food output and turning millions into “climate refugees.”

* More severe storms and intense heat waves will kill crops, trigger forest fires, cause floods, and destroy critical infrastructure.

No one can predict how much food, land, water, and energy will be lost as a result of this onslaught (and other climate-change effects that are harder to predict or even possibly imagine), but the cumulative effect will undoubtedly be staggering.  In Resources Futures, Chatham House offers a particularly dire warning when it comes to the threat of diminished precipitation to rain-fed agriculture.  “By 2020,” the report says, “yields from rain-fed agriculture could be reduced by up to 50%” in some areas.  The highest rates of loss are expected to be in Africa, where reliance on rain-fed farming is greatest, but agriculture in China, India, Pakistan, and Central Asia is also likely to be severely affected.

Heat waves, droughts, and other effects of climate change will also reducethe flow of many vital rivers, diminishing water supplies for irrigation, hydro-electricity power facilities, and nuclear reactors (which need massive amounts of water for cooling purposes).  The melting of glaciers, especially in the Andes in Latin America and the Himalayas in South Asia, will also rob communities and cities of crucial water supplies.  An expected increase in the frequency of hurricanes and typhoons will pose a growing threat to offshore oil rigs, coastal refineries, transmission lines, and other components of the global energy system.

The melting of the Arctic ice cap will open that region to oil and gas exploration, but an increase in iceberg activity will make all efforts to exploit that region’s energy supplies perilous and exceedingly costly.  Longer growing seasons in the north, especially Siberia and Canada’s northern provinces, might compensate to some degree for the desiccation of croplands in more southerly latitudes.  However, moving the global agricultural system (and the world’s farmers) northward from abandoned farmlands in the United States, Mexico, Brazil, India, China, Argentina, and Australia would be a daunting prospect.

It is safe to assume that climate change, especially when combined with growing supply shortages, will result in a significant reduction in the planet’s vital resources, augmenting the kinds of pressures that have historically led to conflict, even under better circumstances.  In this way, according to the Chatham House report, climate change is best understood as a “threat multiplier... a key factor exacerbating existing resource vulnerability” in states already prone to such disorders.

Like other experts on the subject, Chatham House’s analysts claim, for example, that climate change will reduce crop output in many areas, sending global food prices soaring and triggering unrest among those already pushed to the limit under existing conditions.  “Increased frequency and severity of extreme weather events, such as droughts, heat waves, and floods, will also result in much larger and frequent local harvest shocks around the world… These shocks will affect global food prices whenever key centers of agricultural production area are hit -- further amplifying global food price volatility.”  This, in turn, will increase the likelihood of civil unrest.

When, for instance, a brutal heat wave decimated Russia’s wheat crop during the summer of 2010, the global price of wheat (and so of that staple of life,bread) began an inexorable upward climb, reaching particularly high levels in North Africa and the Middle East.  With local governments unwilling or unable to help desperate populations, anger over impossible-to-afford food merged with resentment toward autocratic regimes to trigger the massive popular outburst we know as the Arab Spring.

Many such explosions are likely in the future, Chatham House suggests, if current trends continue as climate change and resource scarcity meld into a single reality in our world.  A single provocative question from that group should haunt us all: “Are we on the cusp of a new world order dominated by struggles over access to affordable resources?”

For the U.S. intelligence community, which appears to have been influenced by the report, the response was blunt.  In March, for the first time, Director of National Intelligence James R. Clapper listed “competition and scarcity involving natural resources” as a national security threat on a par with global terrorism, cyberwar, and nuclear proliferation.

“Many countries important to the United States are vulnerable to natural resource shocks that degrade economic development, frustrate attempts to democratize, raise the risk of regime-threatening instability, and aggravate regional tensions,” he wrote in his prepared statement for the Senate Select Committee on Intelligence.  “Extreme weather events (floods, droughts, heat waves) will increasingly disrupt food and energy markets, exacerbating state weakness, forcing human migrations, and triggering riots, civil disobedience, and vandalism.”

There was a new phrase embedded in his comments: “resource shocks.” It catches something of the world we’re barreling toward, and the language is striking for an intelligence community that, like the government it serves, has largely played down or ignored the dangers of climate change. For the first time, senior government analysts may be coming to appreciate what energy experts, resource analysts, and scientists have long been warning about: the unbridled consumption of the world’s natural resources, combined with the advent of extreme climate change, could produce a global explosion of human chaos and conflict.  We are now heading directly into a resource-shock world.