I've been thinking lately about the different styles of the Clinton and Obama campaigns. Doonesbury had some fun with the "poetry of Barack Obama" vs. the "prose of Hillary Clinton", but I think there's something more complicated underneath.
Both candidates promise change, but their rhetoric - or what I hear in it - offers a very different perspective on the power needed to make change happen.
To me, I hear Hillary Clinton asking voters for the power she needs to make the change that they want. I hear Barack Obama calling us all together to make change with the power that we have together.
I could be totally off-base, and this may be as simple as the number of times Barack Obama says "we" having some effect on my mind.
(And I hear John McCain mostly asking for power to do, well, whatever he and his friends want to do. I'm not sure why we're supposed to give it to him, but then I wasn't particularly sympathetic to him anyway.)
In business history, there are a few industries that especially stand out for their lack of interest in the welfare of their workers, the places where they work, or pretty much anything except the bottom line. Mining of all kinds is historically awful, as are oil and gas drilling. Related industries - refining, smelting, and electricity generation, aren't particularly beloved either. All of these can be called extractive industries, as they seek to get something out of one place and bring it to another place.
The basic problem with extractive industries is simple: they try to serve their customers, while making the most profit they can. Since the results of extractive industries are usually generic commodities, it's historically been hard to seek premium prices from customers for better quality or behavior. Profits need to come from reduced production costs. There's often a geographic separation between their customers and the place the goods come from. The more drastic the separation, the less likely it is that the customers will care about the consequences of the extraction, freeing companies to cut their costs of production.
I should pause to be clear that I don't mean to say that extractive industries are evil by their very nature. However, economics suggests and history by and large supports the idea that the internal forces that drive decisions for these business don't always feels so good to those on the outside.
Wind energy is often cast as a key technology that will rescue us from other, more polluting, extractive industries. This perspective makes a lot of people more willing to dismiss people who aren't thrilled by wind power as the occasional crank, while they'd happily support the same kinds of people if, say, mountaintop-removal was at issue.
Assuming that windmills are perfectly clean and that they have no side effects (uncertain), how could they possibly hurt the places in which they're installed? It's not a coal mine spewing tailings, right?
It's not. However, there are still a lot of factors worth contemplating. Wind farms tend to be out in the middle of nowhere, and generate power that needs to go to homes and businesses in denser areas. That means more transmission lines. Transmission lines, however ugly, have become a standard part of the landscape, though, so how can you complain about those?
Well, again, the investors developing these megaprojects want to get the maximum return on their investment. That means selling power where power is most expensive - typically not the places where the power is generated. In New York State, for example, electricity generally costs considerably more than it does in other states. Not only that, but power costs more Downstate - New York City and its suburbs - than it costs Upstate - where the wind farms are likely to go.
The answer, for smart investors? Build a huge powerline connecting the cheaper power to the more expensive power, and sell the same electricity at a significantly higher price. The side effect of that arbitrage will of course be higher prices in the area that used to have the cheaper prices - but that's not the investors' problem.
Sure, there might be local opposition, but that's what friends in Washington are for. Just like the other extractive industries, energy businesses of all kinds have some very nice support from a federal government that lately doesn't have much patience for federalism.
And hey, look at that - there's lots of money pouring into wind, lots of it coming from oilmen and power companies.
I don't mean to rain too hard on wind energy's parade. It's an important component of our future energy generation. At the same time, though, I think we need to give the promises of all kinds of energy investors the same kind of scrutiny we give the promises of oil companies. There's a lot more going on here than free energy.
Making capitalism really work - not just supply and demand, but the rich level of investment that really powers the system forward - requires a sophisticated finance system.
The human fuel that drives capital, epitomized in Gordon Gekko's classic phrase "Greed is Good," is good at building up that financial system. People would generally prefer to have their money making money for them than to be laboring directly for a wage. It's easier.
Unfortunately, that same fuel that drives people to create such systems also erodes the systems they build.
Why?
Because sophisticated financial systems - even just a bank - require a massive amount of trust in their operation. Financial systems aren't perfectly transparent, and thrive in large part because people don't wonder why their deposits aren't sitting in the bank vault at all times.
In the very long term, of course it makes sense for a self-interested financial operator to build and maintain trust. The returns will be more reliable because the many systems connected by the operation will have a much smoother and more predictable set of opportunities.
However, humans don't tend to live in the very long run. That same greed that drives the creation of financial institutions can undermine them severely when short-term profits are readily available, and when ethical or outside regulatory frameworks aren't strong enough to keep operators focused on the very long term.
To make matters much much worse, human trust doesn't go up and down smoothly. Trust tends to accumulate slowly, but collapse suddenly. The discovery of one lapse leads to suspicions of other lapses, especially in a sphere where transparency isn't always possible.
Right now, it seems very clear that a large part of the recent American economy was driven by fraudulent operators seeking short-term profits. Those operations were then sold to a much larger group of investors thanks to creative repackaging that freed those operators from the risks they had incurred and paid them well. The hard question is just how poisonous that breakdown of trust will be to the larger system - not simply in the numbers on the balance sheets, but also in the trust that lubricates markets overall.
