On Dryland farming, Free Market Capitalism and the Threat of the Short-term Thinking they Exemplify

I was watching Ken Burns’ The Dust Bowl about the extended Midwestern drought of the 1930s. At the time, these were dryland farms meaning no irrigation and absolute dependence upon the weather. In 1938, at age 15, I spent the summer on my grandparents farm is central Iowa. This was a dryland farm and the risks a farmer took every year would have a Wall Street financier shaking in his Guccis. The corn crop could be wiped out by a hailstorm, which often accompanied thunderstorms. So every time the summer air got thick and the flies gathered in layers on the screen door we knew a thunderstorm was on the way and a possible deluge of crop-destroying hail. Additionally if the rains did not come at the right time and the crop could be damaged by too little or too much rain for a given stage of crop growth. These were small farmers who, unlike today’s Wall Street capitalists did not have hedge investments in other assets that could offset much of the damage of a failed investment. These farmers were capitalists par excellence.

These farmer capitalists knew their business and had little use for government, especially government “interference” in their business of farming. Initially they rejected the advice of government agricultural experts who said the dust bowl was largely a creation of their straight line plowing method, indeed plowing straight furrows was regarded as a hallmark of farming competence. It was suggested that they adopt contour plowing which followed the undulations of the land and which would retain much more of what rain fell. It took a year or more of demonstration to convince farmers to change. Other measures such as leaving stubble in the field until the next planting season and planting rows of wind-breaking trees and letting land lay fallow for a year came from the government and were eventually adopted by farmers. The process of restoring the land had begun and when another drought set in and dust began to blow the farmers themselves went after the miscreants who had not maintained their soil.

The lesson here is that free market farmer capitalists thought they knew it all and distrusted a government that told them they were the primary cause of the event that overtook them. The deeper lesson, omitted from the segment of the documentary I watched, is that short term thinking, i.e. the annual crop production can lead to long term disaster i.e. the dust bowl.

All of this struck me as almost exact paradigm for Wall Street free market capitalism.

Here we have the experts who want the government kept out of “their” business as well as out of affairs  they want to control for profit. Their practices have caused global recession instead of regional disaster. They too disregarded, indeed saw to the overthrow of government regulations created to avoid disasters such as the Great Depression and the Great Recession. However, unlike the farmers, they never learned to accept the regulations their business requires. Under the leadership of Milton Friedman they even developed an economic theory that said it was wrong for the government to be involved in its practices and made that absurd claim public policy in the oft-repeated sole remaining super power.

However, decision making practices of those running this largest casino on the planet leave a bit to be desired.

As with the short-term thinking of farmers that resulted in the Dust Bowl, the short- term thinking elicited by free market capitalism also generates disastrous consequences.

In an article titled The Blindness of Short-Term Thinking ‘Quarterly Capitalism’ Desperately Needs Tempering With Long-Term Guidance, that can be found by goggling the title, the short-term thinking of financial executives is explored.

A group of top asset managers attending a conference sponsored by Morgan Stanley (MS) were asked about their investment time horizon. Fifty-five percent said a quarter or less; only 20% said more than a year. Another survey revealed that 78% of managers would reject a net-present-value-positive project if it would lower quarterly earnings below consensus expectations, and 80% would focus on this short-term metric at the expense of building long-term shareholder value.

This should send shivers down the spine of every investor looking for long-term value creation, because climate risks alone could cost investment funds $8 trillion by 2030, according to Mercer.

The point here is that capitalism has, as perhaps its worst trait, short-term thinking built into it. Despite hopes to lengthen corporate reporting cycles this will remain true because one of capitalism’s primary money making strategies is rapid reinvestment turnover in order to optimize profit. In some types of currency differential investing in the Foreign Exchange Market the profit per transaction is often a fraction of 1%. However, because these transactions take place at computer-driven speed 24/7, worldwide, an average of 1.9 trillion dollars a day is invested. Rapid turnover has become a leitmotif of capital investment. The long-term perspective upon which the future of our species depends is absent in the major arenas of global resource allocation under the sway of capitalism.

Heidi Cullen, in her book The Weather of the Future, deals at length with the failure of the mass of mankind to grasp the gravity of what our species faces. Cullen, a climatologist, consulted psychologists who described two systems inherent in human beings for dealing with risk. One is analytic, carefully considering all aspects of risk. She offers stock market investing as an example of this. The other risk-evaluating system is emotional and stems from very early human evolution. The fight or flight syndrome of threatened animals is an early version of the system in human beings. Cullen’s psychologists told her that this type of decision making has regard only for the immediate, prioritizes in terms of the individual’s experience and assumes that every problem has one cause and, hence, does very poorly in cases where many factors function to cause a threat. Her psychologists told her that, in case of conflict between these two systems, the emotion-driven system will trump the analytic system every time.

Cullen suggests bridging this gap between the analytic and emotional risk assessment systems by including climate forecasts with the regular weather forecast. This, presumably, would give climate forecasts credibility in the public mind. Whether this would work or not, it may not be necessary. Hurricane Sandy’s massive destruction could go a significant way in associating the process of climate change with the immediacy of weather.

Whether or not the intensity of that hurricane was associated with climate change, its track almost certainly was. The normal track for hurricanes going up the Atlantic coast of the United States is to head out into the ocean somewhere between Virginia and Rhode Island. My surmise is that it is following the warmer water of the Gulf Stream. Instead of turning east however, Sandy turned west and tore into some of the most populous areas of the United States. My hypothesis is that the heavy Arctic ice melt this summer poured an immense amount of cold water into the Northern Atlantic, which disrupted the flow of the Gulf Stream, which is also responsible for mild winters in England and other parts of Western Europe. This is a scenario climate scientists have feared for some time. It is known that a high pressure area over Greenland probably blocked what would have been Sandy’s normal path East. Whether that high pressure ridge was caused by exceptionally cold water in the Northern Atlantic I do not know. Scientists are working intensively to understand the dynamics surrounding hurricane Sandy. And as the evidence accumulates the relationship between global warming and this kind of extreme weather will become clearer.

Hurricane Sandy may be a significant event in creating an effective link between climate change and weather. Even more importantly it advances the process of establishing science in the popular mind as the institution of trust when dealing with the real world. The turning from the emotion-driven to the analytic account may get a significant boost in the popular mind if we can get past the corporate control of the mass media with its vested interest in pursuing fossil fuel as the primary energy source. Science may need the public protest of knowledgeable citizens to get past the corporate control of our mass media.

If we are to preserve a democratic society we must, when considering such unprecedented threats as climate change, global food and water shortages and overpopulation, change the mode of risk decision making from short term emotional to long term analytical quickly and pretty thoroughly. If we don’t the decisions will be made by arbitrary authority and probably be made too late. It is time to let that which made us unique as a species rise to the top of the decision making process as we have done in science. It is time to understand that believing something does not make it a fact. In short, it is time for mankind to grow up.

Bob Newhard

Facing Up to Our Times

In a lecture that may be found on YouTube under the title Chris Hedges on Death of the Liberal Class, Chris Hedges details the massive corruption and social dysfunction that corporations have introduced into human society at the end of which he expresses no hope that mankind will avoid the abyss that it has created for itself.

There is, in Chris' judgment, a possible way to deal with our situation and that is to incorporate the poor of the planet into the wealth of the planet. This would avoid a class of millions of desperately poor people whose implacable resentment is the seed bed for the totalitarianism that will overtake us otherwise. Lest it be thought that Hedges is placing too much importance on the significance of the poor I suggest reading Frantz Fanon's Wretched of the Earth which can provide some insight into the dimensions of massive poverty in a world of ostentatious wealth. Also, as Mike Davis in his Planet of the Slums notes, the U.S. Military is refocusing its combat training on the slums, the environment from which it expects the major conflicts of the future to emerge.

However, Chris says, this necessary redistribution of wealth will never happen in a world dominated by coporate capitalism. In consequence of this corporate power and intransigence Chris, being the tenaciously honest person he is, faces up to the despair his conclusion leaves him with. His recourse is to individual acts of resistance, justice and compassion that, while not changing the course of the vicious folly we face, will confirm the best that is in us. He closed the lecture with the last lines of W. H. Auden's poem September 1, 1939, written as Auden saw with despair the horrible implications of the German invasion of Poland, which touched off World War II.

Defenceless under the night
Our world in stupor lies;
Yet, dotted everywhere,
Ironic points of light
Flash out wherever the Just
Exchange their messages:
May I, composed like them
Of Eros and of dust,
Beleaguered by the same
Negation and despair,
Show an affirming flame.
Obviously Chris has asked himself and us, how will we live our lives in these times of crushing irrelevance and denial. It is a question that, in my judgment, every morally engaged person must ask themselves. 

Nevil Shute ends his novel On the Beach, which depicts the end of humanity as the radioactive fallout from a massive nuclear exchange in Europe circles the world by the prevailing winds, by portraying the mass of mankind either turning to religion or to a final great party as they anticipate their end.

In contrast, Chris Hedges writes for those relatively few who face the moral consequences of the demise of our species.

I dealt with this issue some time ago when I could see no way out for our species that has given me everything I value. Unfortunately,­ mankind's intelligence has been dominated by its primordial emotions throughout evolution. What is most unique to our species has been held hostage to its much earlier biological self. When faced with despair as to the fate of our species I find that “affirming flame” in mankind's unique ability to think and thereby understand. In that quest to understand, and perhaps help avoid the pitfalls of fear-driven passion, may there be those found in that pursuit should our species fail.

Bob Newhard