Consumers Vote No Confidence in U.S. Energy Policies

The Conference Board said yesterday that its Consumer Confidence Index fell to its lowest level in 16 years. No doubt, sharply rising energy prices have contributed to this fall.

I have often told my classes that rising energy prices are not something I fear, and then I proceed to give a big exception: “If government becomes heavily involved in the market for energy, I will add rising energy prices to my list of fears.” Allow me to explain.

Before the Industrial Revolution, life for most was lived at a bare subsistence level. Most grew their own food and made their own clothing. Few lived in cities, most were malnourished, and energy was very expensive.

Before 1700, charcoal was the dominant fuel used in England. By the 18^th Century, England had used up most of its forests to make charcoal. So how could the Industrial Revolution have begun in England without a viable fuel source? Did an English king or parliament promise to solve the problem? Did they punish speculators? Did they subsidize some alternative forms of energy? None of this occurred, but alternative fuels began to arise as ironmakers began to use cheaper coke (a form of coal) instead of charcoal.

Until 1850, in some homes, whale oil was the preferred form of fuel for indoor illumination because it burned with less smoke and odor. By contemporary standards, whale oil was enormously expensive; the average home could not afford it. For many Americans at that time, indoor activities basically ended at sunset.

In 1857, a clean burning kerosene lamp was introduced, and the use of relatively scarce whale oil ended very rapidly. By the end of the 1800s, refined petroleum was selling for literally pennies a gallon—there had been an astonishing reduction of almost 97% in the price of refined petroleum.

Since falling energy prices in real terms has been the norm for centuries, it is instructive to ask: What has gone wrong in the past few years? Many explanations are offered: The “peak oil” theorists say we are running out of fossil fuels. Others blame growing demand from the emerging economies of China and India. Others blame large oil companies. Still others blame speculators. All of these explanations do not reveal the truth.

First, consider that we were running out of charcoal; then we were running out of whale oil; but yet, alternatives—developed by entrepreneurs on the free-market—pushed energy prices down at dramatic rates. This dramatic fall in the cost of energy has played a large role in the growth of the middle class.

Next, consider the dramatic rise in energy usage caused by the Industrial Revolution and by the growth of the United States. During this same period, energy prices fell dramatically. Rising demand coaxed out more supply and more efficient ways to find and use energy. When we review history, we see that neo-Malthusians, such as Paul Ehrlich and the Club of Rome, have been claiming for decades that we are running out of resources. The truth is that the emergence of the Chinese and Indian economies is a happy occurrence for the billions who have been impoverished for so long.

Then, consider large oil companies. I will not defend their honor, but I will point out that the assertion that they have formed a nefarious cartel, impervious to market forces, is about as believable as saying that Ford, Chrysler, and GM could band together and increase prices in order to solve their woes.

Finally, consider speculators. A speculator is a friend of the consumer. Speculators can only make money if they buy low and sell high. In other words, they will make money only if they transfer supply from times of relative plenty to times of relative scarcity. If they are wrong, they must sell when prices are lower; thus speculators have every incentive to avoid such blunders.

If mainstream explanations for rising energy prices hold little water, what instead can we look towards? First, the Fed by destroying the value of the dollar must take a large share of the responsibility. As importantly, we can look towards ethanol subsidies that have drained away billions of dollars from the market—dollars that could have been invested in the discovery of truly viable alternative fuels.

Obama and Clinton are promising more of the same. Obama ‘s official web site promises this:

Obama will invest $150 billion over 10 years to advance the next generation of biofuels and fuel infrastructure, accelerate the commercialization of plug-in hybrids, promote development of commercial-scale renewable energy, invest in low-emissions coal plants, and begin the transition to a new digital electricity grid. A principal focus of this fund will be devoted to ensuring that technologies that are developed in the U.S. are rapidly commercialized in the U.S. and deployed around the globe.

Did you feel angry or did you laugh when you read “Obama will invest…”? No, Obama will not contribute any of his own money; he will drain away $150 billion from consumers and entrepreneurs who can fund viable alternative energy and, in the process, throw away on follies such as ethanol not his own but other people’s money.

As for Clinton, her official campaign site promises:

Hillary would transform our economy from carbon-based to clean and energy efficient, jumpstarting research and development through a $50 billion Strategic Energy Fund and doubling investment in basic energy research.

If you believe that Hillary and her band of experts are smarter than thousands of entrepreneurs who are committing their own resources toward discovering alternative energy sources, then you should vote for her.

As for McCain, he has been all over the place on ethanol. His web site promises: “John McCain Will End Policies That Contribute To Higher Transportation And Food Costs. Ethanol subsidies, tariff barriers and sugar quotas drive up food prices and hurt Americans.”

Clearly, of the three, McCain currently has the most promising position on energy; but he may flip-flop yet again. When in the debates he will have to talk in 30 second bites, McCain is likely to be hammered by Obama alleging that he is not doing enough to help the American people.

And what of the American people? It is a truism that we will get the government we deserve. If we collectively have little understanding of history and economics, we will fall for the seductive call for yet more government intervention. If we are seduced, the current level of consumer confidence will seem in hindsight to have been high.

Jason and the Golden Thong

Although I am a life-long New York Yankees fan, I have barely watched them play this year. No, I am not a fair weather fan—this Yankee “team” is simply a boring collection of players who are going through the motions. Baseball on television can be a tedious affair under the best of circumstances; but when the players don’t seem to care, the game becomes unwatchable.

Consider the case of Jason Giambi. First baseman Giambi, an admitted former steroid user, was signed by the Yankees to a lucrative, long-term contract just before his production collapsed. This year Giambi is earning the second highest salary in the major leagues. For his more than $23 million a year, he gives back to the team offensive and defensive production that is among the worst in baseball. In 2007, he hit just .236 with 14 home runs and 39 RBIs. This year his batting average has sunk further to .191.

For some reason, Giambi has recently revealed that he has a lucky, gold, tiger-striped thong that he wears under his uniform in order to break out of slumps. “I only put it on when I’m desperate to get out of a big slump,” he disclosed. Giambi claims to have shared his lucky thong with current teammates Derek Jeter, Johnny Damon, and Robinson Cano. Giambi further claimed 100% success for his thong: “All of them wore it and got hits. The thong works every time.”

Of course Giambi’s claim is self-evidently absurd, given his own batting average and the current performance of his teammates. Cano is hitting .204 and Damon .250—almost matching Giambi’s offensive futility. Only Jeter is hitting above .300.

OK, enough beating up on Giambi and the Yankees. But, there is a universal lesson to learn here. That lesson is simply this—in any endeavor, our performance has everything to do with the depth of our training, practice, and preparation and our willingness to allow our abilities and gifts to shine through in pressure situations. Our performance has nothing to do with our attempts to control the situation.

Allow me to share my own personal revelation. When I have a big “game”—for instance, a seminar presentation to an audience outside my University—to the extent that I allow feelings of insecurity to guide me, I will pay inordinate attention to the clothes that I put on that morning. While I have never put on a gold thong, I have changed my shirt more than once.

When you are facing a new audience, it is common to have thoughts about how you will be received or what the outcome will be. If you entertain such thoughts, they quickly begin to fester and to generate feelings of anxiety, worry, and fear. As fear and anxiety grow, our ego will attempt to control the external environment and gain any perceived edge that it can. Hence, Giambi puts on a golden thong, or in my case, I change my shirt.

Many years ago, before I understood what my ego was up to, I behaved as though I believed that I performed better wearing one shirt over another. I’m sure that the origin of this belief was not too different from that of Giambi’s belief in his thong. I would choose one shirt; and if I performed well that day, I would tend to choose that shirt again the next time.

Even then, deep down, I really knew better. My performance has about as much to do with my shirt as Giambi’s has to do with his thong. Over the years, I have learned much about how to gently observe the stories my ego feeds me—and I have learned how to gently laugh at those stories. When I stick to my knitting, when I am prepared, and most importantly, when I am willing to observe and dismiss thoughts that create anxiety, I feel no need to change my shirt.

When I do the important work of gently easing my ego out of the picture, more often than not, I will be in the flow and my seminar will be successful. Those in sports call this being in the zone. Being in the zone is natural—once we stop identifying with our egoic thinking. In an interview in The Sun Eckhart Tolle described what happens when we get lost in a world of our egoic thinking:

We live in a world of mental abstraction, conceptualization, and image making — a world of thought. And that becomes our dwelling place. It is a world characterized by the inability ever to stop thinking. The mental noise is a continuous stream. Psychologists have found that 95 percent or more of it is totally repetitive. Perhaps 10 percent of those thought processes, at most, are actually needed to deal with life. Thought can sometimes be very useful, but in our world it has become obsessive, compulsive, almost like an addiction. People’s sense of identity, of self, gets bound up with their mental concepts and mental images of “I” and “me.”

Our addiction to our ego thinking is certain to put us in a slump. Gosh, for the money that Giambi is making, you would think that he would invest in a good sports psychologist. I’ll give him some simple advice for free. First, practice and train harder than ever before—all the thongs in the world will not help you if you don’t cultivate your ability and talent. Next, when your ego thinks it can control your anxiety, observe what you are thinking—there is a false belief about yourself in relationship to the world that is being revealed by your ego’s story. Be willing look at those thoughts; but then, drop them. You will never break out of your slump while you are lost in your ego’s story.

Working for a Living

When I am in my car driving between 3 to 6 p.m., one of my guilty pleasures is listening to talk radio host Ron Smith of WBAL-AM. Ron is the Babe Ruth of talk show hosts—he combines being provocative and literate about a wide variety of subjects with being a non-partisan critic of the failures of both Republicans and Democrats. I call it a guilty pleasure because, although Ron is not mean spirited, some of his callers can be; and there are moments when you cringe as you listen.

After the stock market closes at 4 p.m., the amicable Jonathan Murray, Vice President of Investments for a large NYSE firm, comes on to give the “closing bell report.” Jonathan is a very good salesman, and he plays the part of the cheery optimist reassuring investors that stocks and bonds remain good investments.

He also plays the part of giving glib and seemingly plausible, expert explanations as to why the stock market moved how it did that day. The other day the stock market was down; oil was up; and not surprisingly, like many analysts, Jonathan incorrectly attributed causation.

Ron likes to banter with Jonathan, and Ron began to comment on how many people are being hurt by rising gasoline prices. Jonathan jumped in with a glib: “I know, I’m being hurt” type comment. He was quickly rebuked by Ron who pointed out that Jonathan was not exactly on the edge financially, and that for many families, rising fuel bills are literally causing them to go without other essentials.

As I listened, I began to reflect on how many individuals in this country no longer work for a living—for them the impact of rising fuel bills is a nuisance, instead of a frightening attack on their standard of living.

Our county was founded by revolutionaries who did not believe in wealth that was earned through privilege. In Europe, wealth could be earned and maintained if you were a member of the aristocracy or the church or if you were a merchant who was granted a monopoly by the crown.

In recent decades, the number of Americans achieving wealth or living through unearned means has skyrocketed. Here are just a few examples:

Politicians—When Harry Truman left the presidency in 1953, he had no personal savings; an Army pension of $112 a month was his sole income. He literally had to take out a personal loan from a Missouri bank to survive. In contrast, Bill and Hillary Clinton managed to achieve great personal wealth though their career of “public service” and have earned close to $110 million dollars since leaving the White House. As the saying goes “they came to do good and ended up doing well.” Career politicians have become America’s new aristocrats.

Subsidized Businesses—This blog has been covering subsidies to ethanol. Of course, ethanol subsidies are just the tip of the iceberg. There are subsidies for farm commodities, there are tariffs and quotas that protect domestic producers of steel, textiles and other goods, there are laws without which nuclear energy could not exist, there are laws which have granted cable companies monopolies, etc. These subsidies are little different in effect than the monopolies granted by the crown centuries ago.

Subsidized Professions—Lawyers who lobby for subsidies for businesses have jobs that would not exist without government subsidies, doctors whose incomes are enhanced because the AMA is able to hold down the supply of physicians, excess public school administrators who would not have jobs on a free-market, and professors who can’t teach or do meaningful research and yet who earn a good living are just a few examples of distortions caused by government grants of privilege.

The Defense Establishment—In their farewell addresses, Washington warned of entangling alliances and Eisenhower warned of the militarily-industrial complex. Both warnings have been ignored, and today both entangling alliances and a huge military-industrial complex have been a bi-partisan norm that threatens our liberties and our economic well-being. Millions earn their livelihood through this complex which has gone far beyond providing for the needed defense of this country.

Obviously, I could go on. The point is that as the proportion of Americans who depend upon government for their livelihood increases, the proportion of people working for a living shrinks and the vitality of this nation is drained away. As this happens, the American experiment at some point will become unsustainable.

Success Beyond Success

In late April, an extraordinary event happened in a women’s softball game between Central Washington and Western Oregon Universities.

In the second inning of the game, Sara Tucholsky, an outfielder for Western Oregon, smashed a ball over the center field fence for her very first career home run. In her excitement, she badly injured her knee rounding first base. She was unable to continue circling the bases.

What could Tucholsky or Western Oregon do? Could her teammates carry her around the bases? No, the umpire ruled against that option. Could her team substitute a pinch runner? Yes, but the pinch runner would have to remain at first base, and Tucholsky’s home run would become a single.

It did not look good for Tucholsky. Then, Central Washington’s first baseman and the league’s all-time home run record holder, Mallory Holtman, asked the umpire if she and her teammates could carry their opponent Tucholsky around the bases. The answer was yes, and so they did. Central Washington lost the game and, in so doing, decreased their chances of making the NCAA tournament. Holtman is a senior and has never been to the tournament.

In post game interviews, Holtman offered that she had done nothing extraordinary and that anyone would have behaved the same way. Sadly, we know that isn’t the case. In sports, cheating has been routinely tolerated; unsportsmanlike conduct is viewed as part of the game.

Clearly Holtman’s actions were not ordinary. We can imagine other players never having the impulse to be of assistance. Still others might shut down any impulse to help with thoughts like: “We really need to win this game to be in the NCAA tournament.” Or, “Her unfortunate accident is just part of the game. Nothing I can do about it.” And who would fault such players for their inaction?

In her outstanding book Soul-Kissed, Ann Linthorst tells this story of a “woman who was showing her spiritual teacher around her backyard”:

The teacher commented on the number of birds. The woman exclaimed. “Oh, I have never noticed any birds out there before. “ Her teacher replied, “Madam, you must have birds in your heart before you will find birds in your backyard.”

In other words, what allowed Holtman to act in such an inspired way, was that a higher value had already been cultivated in her heart—the value of treating another human being as she would treat herself. Eckhart Tolle has written: “The true meaning of love is to see the other as yourself.”

Linthorst’s teacher, the late Dr. Thomas Hora, offered this principle of harmonious living: “Take no thought for what should not be; seek ye first to know the good of God which already is.”

Why is this a principle of harmonious living? Hora’s principle stresses process above outcome. For example, in the softball game—instead of allowing the ego to run through its reasons why it should or should not help, prior practice of this principle orients the mind to allow harmonious choices to flow through spontaneously, even in the heat of the moment.

Holtman and her Washington State team clearly allowed a decision to flow through them—a decision that emanated from beyond their egos. In doing so, they won more than a game. They achieved what Fred Kofman has called “success beyond success.” They strengthened their future ability to allow happiness, love, and peace to flow though them.

Some cynics may view the Central Washington State players as foolish altruists. Those cynics are wrong. Recent academic research on happiness demonstrates that happiness depends very little on success in the world. Transitory events like winning a ball game have only temporary effects on happiness. In contrast, expressing higher values—values such as love and gratitude—has enormous and lasting effects on happiness.

Besides teaching us a life lesson, Central Washington may have become an even better team. For, as legendary basketball coach Phil Jackson has observed, “Love is the force that ignites the spirit and binds teams together.” No doubt, a team whose spirit is ignited and whose players are bound together will play better.