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In his opinion piece in today’s New York Times, “Time for (Self) Shock Therapy“, Tom Friedman argues that when President-elect Obama takes office he should gather the heads of the top 300 banks in the U.S. and set out a course of action of “shock therapy.” The President-elect should tell the bankers that the economic mess began with them and their lax lending standards and is prolonged by them by the fact that they are now unwilling to lend at all. He envisions the new President telling the bankers

Those of you who are insolvent, we will nationalize and shut down. We will auction off your viable assets and will hold the toxic ones in a government reconstruction fund and sell them later when the market rebounds. Those of you who are weak will be merged. And those of you who are strong will receive added capital for your balance sheets, after you write down all your remaining toxic waste. I am not going to continue rewarding the losers and dimwits amongst you with handouts.

(Friedman, Thomas, “”Time for (Self) Shock Therapy“, The New York Times, January 18th 2009)

I agree with Tom on this matter, but I would argue that the “shock therapy” should extend beyond just the banks but out to American businesses in general. Consider that Circuit City just announced that because it could not restructure its debt and because it failed to find a buyer for the company that it was forced to completely liquidate all of its remaining stores and go down the Chapter 7 bankruptcy path. Add another 34,000 jobs lost. Two out of three of the major American automobile manufacturers, GM and Chrysler, have secured $17.4 billion in loans from the federal government to help them through 2009 (“Feds give GM, Chrysler $17.4B bailout“, The Detroit News, December 26, 2008 ). Retail sales fell 2.8% during this past holiday season according to the National Retail Federation (“Store sales fell 2.8% during the holiday, National Retail Federation says“,, January 14th 2009).

This is not just about banks (although they certainly do provide much of the impetus for the current economic trouble). It’s also about a failure of American business to be competitive in a global landscape (in the case of GM and Chrysler — and to a lesser extent Ford) as well as the belief that we can continue to spend and spend as though tomorrow will never come and the bill will be due. As Americans we must refocus our perspective. We cannot continue to live with the idea that we should buy just for the sake of buying. As Anna Quindlen noted in her Newsweek piece “Why Stuff Is Not Salvation”

“I looked into my closet the other day and thought, why did I buy all this stuff?” one friend said recently. A person in the United States replaces a cell phone every 16 months, not because the cell phone is old, but because it is oldish. My mother used to complain that the Christmas toys were grubby and forgotten by Easter. (I didn’t even really like dolls, especially dolls who introduced themselves to you over and over again when you pulled the ring in their necks.) Now much of the country is made up of people with the acquisition habits of a 7-year-old, desire untethered from need, or the ability to pay. The result is a booming business in those free-standing storage facilities, where junk goes to linger in a persistent vegetative state, somewhere between eBay and the dump.

(Quindlen, Anna, “Why Stuff Is Not Salvation“, Newsweek, December 13, 2008 )

Americans must re-learn how to save money, to invest wisely (no more of these “get-rich-quick” schemes), how to make thoughtful decisions (fortunately, we will soon have a President who appears to be thoughtful in his decision making) and how to lead once more. This will not be an easy transition and it will require some tough choices, but we as Americans can do it but more importantly, we must do it.

Why can’t we? Tom Friedman’s latest op-ed piece in the Sunday New York Times focused on what the Danish have accomplished as far as energy independence. It turns out that the Danish have managed to make themselves 100% energy independent. That’s right…the 1973 Arab oil embargo following the Yom Kippur War initiated by Syria and Egypt against Israel impacted Denmark’s economy hard. The impact was so hard that the Danish had to ban Sunday driving altogether!

What’s most interesting is the response of the Danes to that crisis. Rather than deciding that drilling for more oil domestically was the solution they turned to alternative, renwable energy as their solution. How did they do it. Well, according to Tom Friedman the

Danes imposed on themselves a set of gasoline taxes, CO2 taxes and building-and-appliance efficiency standards that allowed them to grow their economy — while barely growing their energy consumption — and gave birth to a Danish clean-power industry that is one of the most competitive in the world today. Denmark today gets nearly 20 percent of its electricity from wind. America? About 1 percent.

(Friedman, Tom, “Flush with Energy“, The New York Times, August 10, 2008 )

The increased taxes pushed the Danes to be more energy efficient and to innovate in many ways. They recycle waste heat from coal-fired power plants and use it for home heating and hot water and they incinerate trash in central stations also to provide home heating (Friedman, Tom, “Flush with Energy“, The New York Times, August 10, 2008 ) The reshaping of their energy market with high taxes on fossil fuels and high energy efficiency standards has not stifled innovation in the private sector. Rather it has created jobs and industries. In the 1970s Denmark’s wind industry was non-existant. Today one-third of all manufactured terrestrial wind turbines in the world come from Denmark and over the past 10 years Denmark’s energy technology exports have tripled. (Friedman, Tom, “Flush with Energy“, The New York Times, August 10, 2008 ) Denmark’s minister for climate and energy, Connie Hedegaard notes that

“It is one of our fastest-growing export areas,” said Hedegaard. It is one reason that unemployment in Denmark today is 1.6 percent. In 1973, said Hedegaard, “we got 99 percent of our energy from the Middle East. Today it is zero.”

(Friedman, Tom, “Flush with Energy“, The New York Times, August 10, 2008 )

So here’s the bottom line. Denmark had fewer resources than we do now to make this transformation over the past 30 years. What’s stopping us from doing the same thing. Consider that in the short term we will be paying higher taxes for energy but in the long run we will be breaking the oil addiction that OPEC wants us to be on and we will stop channeling money into the coffers of people like Vladimir Putin and Hugo Chavez who would love nothing better than a world without a United States. Both John McCain and Barack Obama must be willing to spell out a visionary energy plan that will end this stranglehold that OPEC and the petrodictators hold over us. We are already seeing what Vladimir Putin and the Russians are now doing with their newly discovered wealth and power…they’re invading former Soviet republics with the intent of reconstructing a Greater Russia. Similarly with President Chavez and the Arab leaders of the middle east. Our only way to break this is by breaking the oil addication.

Tom Friedman’s most recent op-ed brought to mind the efforts of T. Boone Pickens in Texas and Shai Agassi in Tel-Aviv to break America’s and Israel’s dependence on oil. And their both doing it through renewable energy. I’ve already written about T. Boone Pickens efforts with wind energy in West Texas. Shai Agassi, however, is taking a different tack. He’s doing it by building a fleet of electric vehicles – in cooperation with the French firm Renault. In addition to the vehicles, he’s looking to build a network of recharging stations all around Israel so that you just subscribe to his service — kind of like how you do with your cell phone now — and you have unlimited charges. To power this system Agassi is contracting for 2 gigawatts of solar energy from Israeli power companies! There’s an old joke about how God gave the Jews the only piece of land in the Middle East without oil underneath it. But in fact the “oil” of Israel is its brain trust, talent, and vast supply of sunshine in the desert!

I applaud the efforts of men and women like T. Boone Pickens and Shai Agassi who are helping to lead the Green Revolution — even if Mr. Pickens has some not so nice aspects to him he’s doing the right thing here. As he told Tom Friedman, he was “tired of waiting for Washington to produce a serious energy plan.” (Texas to Tel-Aviv, Tom Friedman, New York Times, July 27, 2008 ) Friedman continues by noting Pickens belives that unless ‘“Congress adopts clear, predictable policies” — with long-term tax incentives and infrastructure — so thousands of investors can jump into clean power, we’ll never get the scale we need to break our addiction.’ (Texas to Tel-Aviv, Tom Friedman, New York Times, July 27, 2008 )

Like Tom Friedman, I wonder to myself what a shame we don’t have a Congress and a President who are able to mobilize more people like T. Boone Pickens and Shai Agassi to lead us off the OPEC needle and reduce our greenhouse gas emissions instead of wasting their time with cockamamie schemes like gas tax reduction, or releasing the oil in the strategic petroleum reserve or promoting more off-shore oil drilling.

August 2020

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