Innovation Agenda - Future 500

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All essays in this volume are written expressly for this publication or are reprinted with permission of the authors and/or copyright owners. Future 500 Publishing San Francisco, California Copyright © 2012 by Bill Shireman Printed in the United States of America Future 500 The Westin St. Francis 335 Powell Street, 14th Floor San Francisco, CA 94102 Phone: (415) 294-7775 Fax: (415) 520-0830 [email protected] www.Future500.org Cover Design by Glen M. Edelstein Cover Photo © Gabriel Edelstein Book Design by Greg Gubi

TABLE OF CONTENTS Welcome & Introduction

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UnConvention Sessions

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TOWARD AN INNOVATION AGENDA How to End the Left and Right’s Favorite Deficits

The Two Deficits Why Conservatives and Progressives are Both Right – Bill Shireman

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An Agenda for the Future Energy, Taxes, and Security for Our Great Grandchildren – George P. Shultz

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An Economic Program for the Fall Campaign and the Next Four Years

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– Robert J. Shapiro Make It, Take It When No One Owns Their Environmental Impacts, Everyone Loses – Robert F. Kennedy, Jr.

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End Taxes As We Know Them Stop Taking Prosperity, Start Taking Responsibility – Bill Shireman

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Section Two

CRONY CAPITALISM How to End Right and Left Dependence on Big Government and Big Business

Crony Capitalism and the Crisis of the West – Luigi Zingales

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Three Easy Ways to End Cronyism – Peter Schweizer

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Paul Ryan’s Fairy-Tale Budget Plan – David A. Stockman

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Section Three

ENERGY SECURITY BLANKET How to Outgrow Right and Left Addiction to the Past

The Supply and Demand of Renewable Energy – Dennis V. McGinn

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Efficiency and Conservation Not Enough to Achieve Energy Security – Dave Kerner & Scott Thomas

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To Drive or Not to Drive, That Is the Question June 21 is Dump the Pump Day 2012 – Michael Marx

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Section Four

DIGITAL FREEDOM How the Right and Left Can Use Technology to Advance Freedom and Sustainability

A Declaration of the Independence of Cyberspace – John Perry Barlow

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Telework An Opportunity to Dramatically Improve the Nature of Work as well as Reduce the U.S. Trade Deficit, Congestion and the Production of CO2 – Joan Blades

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Europe’s ACTA Freak Out How Hollywood Holds Back the Trade Agenda – Harold Feld

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About Future 500

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WELCOME & INTRODUCTION Welcome to the UnConvention at the Commit! Forum. With an election imminent, we thought it vital to bring together independent leaders from the left to the right, to work with business and civic leaders as we seek common ground, no matter which candidates and parties hold Congress and the White House next January. We all know the nation’s dilemma. America’s two oncegreat political parties are engaged in an angry divorce, each demanding full custody of the nation they claim to love, paralyzing it in the process. The UnConvention is an intervention, not to force a reconciliation neither side wants, but to fill the leadership vacuum left by gridlock. Like it or not, it is time for business and civic leaders from across the left and right to step forward, together, and show what it means to lead. On at least one point, the right and the left agree: Something is wrong in America. After two centuries on the rise, America’s purpose and power are being lost, and the prosperity once enjoyed by middle class Americans is dissipating at an alarming rate. The UnConvention and these essays give us an opportunity to help change the tenor of the debate, and focus on what is best not just for us, but for the nation and the world. We will share ideas with: • Former Secretary of State George Shultz, who challenges the two parties to come together and support important tax, security, and energy reforms. 1  

Toward a New Agenda for America

• David Stockman, who as President Reagan’s Budget Director was the nation’s top spending cop, and who now takes on an Achilles Heel of both major parties: crony capitalism. • Economist Luigi Zingales of the University of Chicago, who some call the Tea Party’s favorite economist, and who proposes changes to the tax code that could meet interests on both the right and left – if only they could overcome resistance in Washington. • MoveOn co-founder Joan Blades, who describes how she is uniting mothers from the left to the right to advance a more civil and functional political process. • Peter Schweizer of the Hoover Institution, who proposes unconventional ways to reduce undue special interest influence and crony capitalism in politics. These and other speakers and essays help provide points along a path that can end America’s two deficits, and restore sustainable growth and genuine prosperity through innovation. They help support and inform major plenary discussions at the UnConvention. Please introduce yourself to me during the UnConvention. We look forward to sharing ideas with you. Sincerely, Bill Shireman President, Future 500

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UNCONVENTION SESSIONS On the agenda for plenary and breakout discussions are topics such as:

Crony Capitalism: Building Common Ground on Maximizing the Potential of the Free Market While Reducing Cronyism Favoring Privileged Industries, Individuals, & Firms. Free-market capitalism has done more to advance human health, wealth, and well-being than almost any other institution in history. Yet, the excesses of the recent past have made many question the very institutions – like banks, regulators, and capital markets – that make the system work. They see a system biased in favor of the very few at the expense of the great many. How do we find common ground and secure the blessings of the free market for us and our posterity?

Dual Deficits: Overcoming Society’s Mounting Fiscal & Sustainability Debts. Was Thomas Malthus right? Will we eventually run out of food, fuel, and the rest of life’s essentials as the future becomes a bleak landscape of painful tradeoffs and harsh conservation? Or can we innovate and grow our way out of these tough times to a brighter future for our society? 3  

Toward a New Agenda for America

Energy Security: Safe, Stable, & Reliable Energy Sources to Fuel Our Economy. Prosperity and energy are inexorably linked. America – and Britain before it, and Rome before it – spends vast sums securing access to energy supplies to fuel the world economy. Without energy, growth stops. Yet current policy – foreign and domestic – often causes as many problems as it solves. How do we secure our energy and economic future in the 21st century?

Digital Freedom: Securing an Online World that Generates Greater Innovation, Prosperity, & Freedom. As more of our economic and civil society moves to a digital world, new challenges arise to security and personal freedom. For every Twitter-generated Tahrir Square there are the long shadows of events like Stuxnet raising the stakes with cyber warfare. As ever, stability and security are the preconditions of freedom, so now is the time for thinking people to sort out how we will ensure the security that will unleash the innovation, prosperity, and freedom of a more digital world.

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Section One

TOWARD AN INNOVATION AGENDA How to End the Left and Right’s Favorite Deficits

   

 

THE TWO DEFICITS Why Conservatives and Progressives Are Both Right by Bill Shireman

Conservatives are right: as a nation, we are out of money and deep in debt. Progressives are also right: we can’t pay off our debt by extracting it from the poor, the middle class, or the environment. But many right and left leaders are wrong about the solution. To reduce the outflow of wealth, some on the right would radically cut government spending now. To increase the inflow of wealth, many would drill baby drill the nation’s resources, as fast as we can. To reduce the concentration of wealth, some on the left would tax prosperity, or simply redistribute it, now. To increase the inflow of wealth, many would spend baby spend – and pay off our debts by printing more money, as fast as we can. The right and left often overlook a simple fact: there is a difference between spending money and earning money. Yes, it is time to reduce the concentration of money and power. Too much is wielded by overgrown government bureaucracies, corporate crony capitalists, and valueconsuming financiers. Rather than feeding at the troughs where money happens to flow, they need to add value commensurate with their take. But to just cut spending, tax prosperity, or deplete our economic or ecological resources would bankrupt us. 7  

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These are false panaceas. One spends down our economic prosperity. The other spends down our energy and ecological prosperity. The real solution to our problem is not to consume value – it is to create it, by tapping the power of people to innovate. Economist Bruce Bartlett, a senior policy advisor to the Reagan and George H. W. Bush administrations, has grown weary of the false debate. In his book, “The Benefit and the Burden: Tax Reform – Why We Need It and What It Will Take,” he describes the futility of massive cuts in federal spending, and proposes a better alternative. The national debt, Bartlett says, is like a bank loan – it must be paid off in installments, out of current income. It is a part of our government debt, but only a small part. The vast majority comes in the form of political commitments we have made to important constituencies: future benefits to retired federal employees, veterans, and Social Security and Medicare beneficiaries. These must be paid only when they come due, so they don’t show up in the federal budget, and aren’t usually counted when we measure the government debt. That is because the government does its accounting on a cash basis, not an accrual basis, the way corporations do. That way, they don’t have to book the full cost of their programs annually. Instead, the government publishes a separate, obscure financial statement, now called the Financial Report of the United States Government. The Obama administration published the fiscal 2011 version on December 23, two days before Christmas, while reporters were too busy preparing for the holidays to read a complex 254-page financial document. Neither The New York Times nor Fox News seemed to notice it. But Bartlett did. Altogether, he found, the 8  

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Treasury reported the government’s total indebtedness at $51.3 trillion. The national debt made up a fifth of this $10.2 trillion. Veterans and federal employees were owed $5.8 trillion. Social Security’s unfunded liability – promised benefits over expected Social Security revenues – was $9.2 trillion over the next 75 years. And Medicare’s unfunded liability was $24.6 trillion. It would be impossible to cut spending enough for a single generation of Americans to pay off this debt – it totals nearly the entire net worth of American households. Unless our productivity and output grows, the Treasury projects that within a generation the federal debt will rise to 100 percent of G.D.P., as our future commitments come due, and suddenly become part of the nation’s acknowledged debt. This would be financing devastating to the nation. Balancing the federal budget would not be nearly enough, as Bartlett and other economists document. The federal government would need to run a surplus continuously for 75 years to prevent the debt/G.D.P. ratio from rising. If we can’t cut spending enough to erase the deficit, what can we do? The right’s first instinct has been to do what worked during our last period of continuous growth: consume more fossil fuel energy. But that path is well worn. It has been about 40 years since the first global energy crisis in 1973. Since that time, rather than innovating beyond our dependence on fossil fuels, the right has focused on building our military power, enabling us to intervene, to prevent any supply disruptions. We have, as a consequence, sacrificed $7 trillion in domestic growth, to fund our foreign oil habit. We have transferred over $1.2 trillion to nations that are either unstable or antithetical to our interests. Those dollars financed the Baathist terrorists under Saddam Hussein in Iraq, the radical Mullahs under the Ayatollah in Iran, and 9  

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of course Al Qaeda, with its roots in Saudi Arabia. In Saudi Arabia, the first Al Qaeda terrorists were so infuriated by the presence of U.S. military on Saudi soil, that they focused their oil-financed operation on throwing the infidels off their soil. Then, failing that, they came to our soil. They used a few of their oil dollars to buy airline tickets in 2001, and took out the World Trade Center, and along with it 3,000 lives. The other panacea of some on the right is to drill our way out of debt. In this view, the U.S. can simply embark on massive and permanently increasing extraction of fossil fuels, all from within our borders. To intellectually clear the way, advocates of this path simply define political, military and environmental realities out of existence. Unfortunately, physical resources are as limited as economic ones, and as unequally distributed. Of the trillion barrels of estimated oil reserves, 6% are in North America, 9% in Central and Latin America, 2% in Europe, 4% in Asia Pacific, 7% in Africa, 6% in the Former Soviet Union. Today, 66% of global oil reserves are in the hands of Middle Eastern regimes: Saudi Arabia (25%), Iraq (11%), Iran (8%), UAE (9%), Kuwait (9%), and Libya (2%). Because reserves in non-Middle East countries are being depleted more rapidly than those of Middle East producers, many of the largest producers in 2002, such as Russia, Mexico, U.S., Norway, China and Brazil, will cease to be relevant players in the oil market in less than two decades. At that point, the Middle East will be the only major reservoir of abundant crude oil. In fact, Middle Eastern producers will have a much bigger piece of the pie than ever before. The U.S. may not be rich in oil, but it does have vast holdings of gas – enough to largely replace our highly polluting stocks of coal, which are being depleted more quickly than once thought. But gas is no permanent 10  

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panacea either. Natural gas producers need to be held to high standards of performance, to protect water and the environment. With these in place, natural gas can help build a bridge to move toward the next energy economy – one where whole new sources of low-carbon energy can emerge. A low-carbon, low-pollution economy is important. But strident true-believers on the right and left advance simplistic solutions. On the right, some expect Americans to swallow the idea that transferring billions of tons of carbon from the earth to the atmosphere has zero impact on the environment. But even scientists who are skeptical about the severity of global warming conclude that it is a real threat. On the left, some expect Americans to believe that only government ownership and control of the energy sector can prevent climate calamity. Neither of these ideological extremes advance genuine solutions. The fiction that dependence on finite physical resources has no cost worth worrying about has undermined the very interests the right holds most important: the nation’s prosperity, security, and freedom. The fiction that massive government spending and power is a solution places the left’s most cherished objectives at risk: economic fairness, social justice, and individual freedom. Much as the right might hope, we can’t cut or drill enough to pay our debt. Our politicians, in order to serve federal employees, veterans, retirees, and other interest groups, have leveraged the whole economy, placing us at the mercy of some of the world’s most threatening nations. Most future spending won’t be for programs, but for interest on debt. The costs won’t just be economic. Much as the left might hope, we can’t just print more money and erase the paper debt as it comes due. Flooding the world economy with dollars that have not been earned 11  

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creates no real value. It doesn’t actually put food on the table or a roof over our heads. Instead, it spurs more spending, both economic and environmental. Genuine prosperity would dissipate, either through inflation, new debt, or ecological exploitation. The reality that neither the left nor right want to face is this: we can’t spend our way to prosperity. We can’t live off subsidies forever. Eventually, someone has to create real value. But who? And how? What’s Exceptional About America? America used to be exceptional, but it is becoming less so. This is both good and bad. It is good, because the principles that made America exceptional – freedom, justice, democracy – are becoming more widely embraced. Nearly a billion people now live in nations that have grown prosperous and powerful in large part by championing principles like these. But America is also growing lax. We consider freedom and prosperity our birthrights. We have grown more comfortable spending our riches than growing them. For three generations, America has been spending down our wealth and power, transferring our assets to dictators in the Middle East and totalitarians in China, in trade for fossil fuels and cheap labor. Nations have every right to trade their resources. But let’s face it – the nations of the Middle East are controlled by a handful of super-rich families who maintain their political power by paying off their people and supporting religious extremists, who use their wealth to foment fear and terror. This is not particularly healthy – for them or us. And China’s government remains totalitarian – its people, while they enjoy increasing economic freedom, 12  

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can’t legally trade their own labor. That right is held by their government. When we grow dependent on these nations for both our labor and our resources, we discover the true cost of debt. The finance sector now accounts for fully 32 percent of U.S. economic output. We make much of our money by counting and processing the money of the world, taking a small portion along the way. Too much of this wealth ends up in the hands of those lucky or cunning enough to be standing astride the river of money as it flows by. Too few of those individuals add enough value to the flow to earn the wealth they accumulate. Many in the sector are aware that a significant portion of their wealth is unearned and undeserved. Occupy Wall Street was right. But the solution is not to redistribute wealth – it is to create prosperity. That is one of America’s true gifts. America is exceptional not because of its people or its geography. It is exceptional because of the principles that define it: freedom, justice, democracy. The way our predecessors embraced and codified these principles brought us unprecedented prosperity and power in the past. They can do so again. American Prosperity and the First Productivity Revolution America’s political paralysis follows closely on one of our greatest historic triumphs: unprecedented material prosperity. Before World War II, in all prior civilizations and social orders, “the vast bulk of humanity had been preoccupied with responding to basic material needs,” Brink Lindsey wrote, in How Prosperity Made Us More Libertarian (Cato Institute, 2007). According to Lindsey, “Postwar America, however, was different. An extensive and highly complex division of 13  

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labor unleashed enormous productive powers far beyond anything in prior human experience. As a result, the ageold bonds of scarcity were broken. Concern with physical survival and security was now banished to the periphery of social life.” America’s triumph was built on the radical increase in labor productivity brought about by industrialization. Between 1890 and 1990, U.S. labor productivity exploded 40-fold – workers generated 40 times more value per hour at the end than the beginning of the 20th century. In the years following World War II, our extensive division of labor unleashed enormous productive powers far beyond anything in prior human experience. That explosive growth was enabled by three primary drivers. First, it came from the genius of machines – their capacity to take a prototype design, and replicate it over and over, enabling a huge middle class to enjoy benefits once available only to the rich. Second, it came from the methods of scientific management which broke processes down into simple, replicable tasks that could be carried out across assembly lines by almost anyone with basic skills. Third, it came from huge increases in material consumption. We saved human labor, but we substituted fossil fuels and raw materials. The first factor, machines, is a source of value that can be sustained over the long run. Machines multiply not just muscle, but also mind. They take a powerful prototype, something conceived by human creativity, and replicate it, shaping raw materials into functional designs that deliver real value.

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The second factor, simplified work tasks, is also sustainable, but at a certain cost. It takes a complex human being, with extraordinary creative capacities, and turns him or her into a machine part, performing rote functions over and over. The benefit is a big paycheck at work and cheap goods at home. The cost is the alienation of the worker from the purpose they are serving. They become a very small part, in a very big whole. The third factor, increased physical consumption, is not by itself sustainable. Material resources are intrinsically limited. We cannot increase consumption indefinitely. Big Government and Big Corporations: The Rise of Dependence The cost of material prosperity has been two forms of dependence. The first is the reduced power of the American worker. In return for prosperity, workers willingly became small parts in large production processes. They sacrificed sovereignty over their own workdays and their individual creative capacities in order to follow rules established for the good of big institutions: big corporations, labor unions, and government. Their reward was big paychecks, generous benefits, and long-term health and financial security. To insure that the tradeoff was worthwhile, the Democratic Party championed a political and economic New Deal, which sought to guarantee Americans a succession of material rights: high wages, generous benefits, safety protections, retirement security, and now universal health care.

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The problem is, the nation no longer has the power to deliver on these promises in the ways we conceived in the 1940s. Because of globalization, combined with the rising costs of entitlement programs, the money to do so is no longer there. The left’s “solution” is often to deny that fiscal limits really exist, and simply print more money: spend baby spend. The Root of the Conflict: Two Worldviews The left’s bias to spend economic resources, and the right’s to spend energy and environmental resources, come from two distinctly different worldviews – two differing views on the root source of wealth. To the conservative mind, nature is a source of limits while a free market economy is a source of opportunities. Life in a state of nature is nasty, brutish, and short. People, in order to survive, must focus primarily on protecting their own self-interest, and that of their family and local community. This can be achieved through a combination of moral and market forces. Moral standards, often codified by religious institutions, motivate them to think of others, especially their families. Market forces, put into play by free trade, motivate them to serve others, aligning self-interest with public interest. To the liberal mind, nature is a source of abundance, while a free market exploits that abundance for selfish, short-term gain. Life in a state of nature offers us all we need. People, in the face of this abundance, will behave selflessly if liberated from all constraints, even trading away some of their own self-interest to support others, so that they too can selflessly give to the whole. Moral 16  

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standards constrain them from simply being themselves, and serving others with their distinctive gifts. Market forces compel them to withhold from others, become increasingly selfish, and demand individual material gain that consumes the prosperity of others. These forces undermine our humanity, disrupt nature’s balance, and threaten to destroy the complex systems that sustain us. Both the right and left hold part of the truth. Nature is a source of limits and opportunities. People are both selfish and selfless. Moral standards are sometimes humane and sometimes not. Markets both create value and exploit. A system that idealizes one or the other cannot function for long. Both the right and left need to accept the limits of their ideologies. The right is correct, in sensing the extraordinary capacity of free markets to create value. They know that the economy is a complex living system; it creates value through the dynamic interplay of people, organizations, and resources, that self-organize in ways that can’t be predicted or controlled. They are aghast at how readily the left leaps at the opportunity to regulate the economy. They know that when you dam it, plug it up and seek to control it excessively, you can destroy its creative capacity. The left is correct, in sensing the extraordinary capacity of nature to create value. They know that nature is a complex living system; it creates value through the dynamic interplay of organisms, communities, and resources that self-organize into innovative new forms in a process of evolutionary development that can’t be predicted or controlled. They are aghast at how readily the right leaps at the opportunity to “drill baby drill” through the heart of this 17  

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vital system. They know that when you dam it, plug it up, and seek to control it excessively, you can destroy its creative capacity. In reality, they both revere parts of the same whole system – the system of feedback-and-adaptation that creates all value and sustains all life. And they both want to sustain this system. The right sees its economic form. The left sees its ecological form. The right reminds us that, from a fiscal perspective, we are out of money and deep in debt. The left reminds us that, ecologically, we can’t grow the economy by depleting the earth, that “drill baby drill” or “cut baby cut” is just another form of exploitive deficit spending. These two movements hold very different worldviews. They appreciate different aspects of value creation. But as they come to recognize the interdependency of nature and the economy, they will discover that the same policies which cultivate innovation in the economy can also support a complex and creative natural environment. Three Forces of Change We live in a time of change. Three forces are transforming our world: the decline of industrialism as the driving force of the global economy, the rise of information and telecommunications as the new chief catalyst for growth, and the spread of globalization, connecting every nation, community, and individual to every other – and linking together their fates as well. If trends continue, this century could see 1,000 times the technological change of the last, according to futurist John Peterson of the Arlington Institute. Think about that. Last century began with horse buggies and a national post 18  

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office and ended with the Internet and email. Everything was transformed in the process, from factories and farms to families and communities. Already, the rigid powers of the past are being overthrown. Gone are the most unbending governments of the industrial age – the Soviet Union and the Maoists of China. Destroyed, battered, or transformed are the generic industrial giants of the last century: General Motors, Standard Brands, General Electric, Standard Oil. And waiting in line, to either adapt or die, are their political supporters: the Republicans, the Democrats, the federal government, and even the United States itself. How will the century ahead end? If the pace of change is 70 times as fast, how different will our lives be in the year 2100? Discontinuous change is almost a certainty. Our lives could be radically different by the next turning. That change will be for the better – and for the worse. It will create risk and opportunity. It will change the context and content of morality. The net effect – whether we move forward or back overall – depends on how skillfully we adapt to unpredictable, uncontrollable, unprecedented change. The Innovation Solution and the Second Productivity Revolution As globalization and technology draw the world together, they create opportunities for innovation that are as great as any in the past three centuries. They create the potential for a second revolution in productivity – but one in which we no longer need to trade ecological assets for economic ones. In February 2011, the respected McKinsey Global Institute (MGI) issued a stark report, Growth and Renewal in 19  

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the United States: Retooling America’s Economic Engine. Their machine-age metaphor may have been misplaced, but their conclusion was right on target. If the U.S. cannot significantly boost productivity growth rates by a third, the consequences will be painful and far more damaging to U.S. prosperity than a double-dip into a deeper recession. “More than ever, the United States needs productivity gains to drive growth and competitiveness,” the McKinsey team wrote. “This acceleration needs to come both from efficiency gains – reducing inputs for given output – and from increasing the volume and value of outputs for any given input.” Labor productivity gains alone are not enough, MGI wrote. It is important that the United States return to the “broadly-based productivity growth of the 1990s when strong demand and a shift to products with a higher value per unit helped to create jobs even as productivity was growing.” If we fail, America might face a resurgence in problems we thought we had overcome in the 20th century: genuine shortages of food to eat, water to drink, and energy to heat our homes and power our machines. The world, after all, is growing more crowded, with people whose affluence is approaching or even exceeding ours. In the next 20 years, today’s 1.8 billion middle class consumers will nearly triple, to as many as 4.8 billion, McKinsey projected in a second study. That could pit Americans against consumers in other nations, in a competition for food and resources. Last century, real global prices for these dropped by almost half, McKinsey reports, benefiting both rich and poor. But in the first decade of the 21st century, the prices doubled, erasing 100 years of declines. For Americans and the world’s rising middle class, this is difficult. For the three 20  

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billion on the planet earning under $3 a day, and the one billion surviving on a dollar or less, it can be life or death.  The Opportunity: People and Technology Can Drive an Energy Productivity Revolution McKinsey offers good news as well. “There is an opportunity to achieve a resource productivity revolution comparable with the progress made on labor productivity during the 20th century,” its team wrote in their November, 2011 study, Resource Revolution. Creative people, and the ideas and technologies they invent, can birth a second revolution in productivity in which we no longer need to trade ecological assets for economic ones. The combination of the microchip, computers, the Internet, advanced materials, advanced recycling, renewable energy, clean technologies and other innovations on the horizon can increase the amount of wealth we create per unit of energy by more than tenfold by the end of this century. What we need are simple incentives – feedback systems to drive up prosperity and environmental sustainability, and drive down the consumption and cost of fossil fuel dependence. Sometimes, establishing those systems requires mandates. But mandates often have unintended consequences and create bad incentives. Sometimes they can be established by voluntary actions, such as by harnessing the buying power of people and companies in the free market. But reliance on voluntary actions often allows free riders to benefit without paying their share.

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The Energy Productivity Explosion Year

The Innovation

Productivity Gain

What It Disabled

Circuitswitching and PBX for data; and later, voice

PACKET-SWITCHING 1960 in data transmission

1000%

Arpanet

ARPANET, 1969 predecessor of the Internet

300%

Routers, LANs, faster and better university research

100,000%

Internet

1974

ETHERNET

1974

INTEL 8080 MICROPROCESSOR

10,000% Personal Computer

1975

ALTAIR PERSONAL COMPUTER

100,000%

Apple II

1977

APPLE II

100%

Internet; and later, VOIP

1980s

INTERNET

1993 1993

Mainframe Computer

IBM

Immeasurable World Wide Web

Experts and Reference Desks

WWW

Immeasurable

Email

Post Office

AOL EMAIL

Immeasurable

Commerce

Brick-andMortar

Major

Social Media

Print Media

Free Long Distance and Video Calls

International Long Distance

1995 AMAZON AND E-BAY 2000s

SKYPE AND VOIP

Major

2000s

BLOGS, FACEBOOK, TWITTER

Major

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What It Enabled

Privacy and Transparency and Institutional People Power Power

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However, there is a third option: common sense incentives that hold consumers and businesses accountable for the full costs of resources they use and pollution they impose, and give them reasons to invest in improvements in resource and energy productivity. The key is shifting from an industrial economy that grows mostly by consumption, to a more informationbased one that grows by design. Consider the difference between the two. If I give you a hardcopy version of this book, then you have it, and I don’t. But if I send you a virtual copy over the Internet, then we both have it. Furthermore, we can send it to 100 of our best friends, or 1,000, or more, with almost zero added time or cost. Of course, we can’t feed, clothe, or house ourselves with information alone. But by injecting more knowledge into older industrial process, we can drive efficiency, innovation, and new value creation. We can create a lot more wealth, with a lot less waste. The Energy Productivity Explosion table shows how information and communications technology has already driven leapfrog gains in productivity, from 1960 to today.  The U.S. needs to begin to replicate last century’s 40-fold leap in productivity. But this time, productivity gains must be more than labor alone. Even more important is a gain in other productivity factors, especially energy. If we are smart, our dominant source of future energy will not be the energy we consume. It will be the energy we create, through innovation. Digital energy isn’t just energy efficiency from better-designed products and processes. It is emergent energy – it comes from innovation. And it is potentially transformative. One way to measure digital energy is as energy productivity. As information and communications 23  

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technology becomes embedded in products and processes, it enables leapfrog gains in productivity. That is why digital can be, by far, the cheapest energy of all. If the past fifty years of economic and energy data hold, we can replace fossil fuels at a rate of 3-5% a year, possibly more. At a 3% pace, it would drive down carbon intensity 75% by 2060; at a 5% pace, it could readily drive down overall U.S. carbon emissions to the levels many climate scientists say is needed. That likely understates its potential, by a wide margin. Think about what has already happened to energy productivity in the information and communications technology sector so far. Energy productivity gains for specific activities – some 1000% or more – led to overall gains in economic productivity. But more interesting than the quantitative gains are the qualitative impacts they had. Each major innovation created powerful new tools that could be used, or abused, by people and institutions. While governments and corporations had new power, people tended to have even more. The capacity of individuals and small groups to disrupt or even destroy centralized institutions gradually grew. The real potential lies in the shift from an industrial economy refined by information, as exemplified by Amazon, toward a truly new economy founded on it – a place where the consumerism phase of industry is simply part of a new system that transcends it, just as agriculture is part of the industrial world today. This is what sets the Internet apart from past systems of communication – this extraordinary flow of informationon-information, extending not in linear form but through a web, not in one direction but in all directions, not with 24  

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static content and reruns, but with dynamic, living content that changes as it’s used. “For those of you keeping score, the dotcom era has ended,” says Henry Jenkins, founder and director of the Comparative Media Studies Program at MIT. “The age of social networks and mobile media has emerged... We are no longer talking about a digital revolution, which envisioned new media displacing the old. We are now talking about media convergence, where old and new media interact in ever more complex ways. We are no longer talking about interactive media technologies; we are talking about participatory culture.” That culture is being created in real time, by individuals – Tea Partiers and Progressives, gamers and bloggers, Indian villagers and high school hackers, consumers and employees, government leaders and corporate executives. As Jenkins says, “We are discovering new ways to pool our knowledge and work collaboratively to solve puzzles and master complex tasks. What we are learning as consumers has the potential to change how we think as citizens. And these new social skills and cultural competencies have implications as well for the future of education.” In his classic 1998 essay, Michael Vlahos, Professor of Strategy at the United States Naval War College, called this emergent system “the fusion of all the world’s communications networks, databases and sources of information into a vast, intertwined and heterogeneous tapestry of electronic interchange.” People will join it, he predicted, because, while it feels artificial and foreign at first, “it offers tremendous advantages. It gives people the ability to meet and access information anywhere, all the time. And people can meet 25  

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in groups, share information and make agreements, just like they do in situ. The difference is that they are not sitebound. Eventually, as the environment becomes more familiar, it will become less alien.” Once drawn in, people become part of something new – a whole new social ecosystem. Vlahos’s prescient 1998 vision is today’s emergent reality. Google gave almost everyone access to the world’s information. Facebook linked us to each other. New networks and digital concepts are sprouting daily – new Googles and Facebooks have already been born. The breakthroughs in Telepresence driven by companies like Intel, AT&T, and Cisco, enable an advanced form of immersive videoconferencing, which is becoming, as the jingle said, “the next best thing to being there.” These and coming innovations take us a step into a world where we can engage fully, and creatively with others – not just as a tool to our industrial lifestyle, but as our primary means of interacting. Efficiency, by itself, doesn’t automatically drive environmental sustainability. That is in part because it happens inside a culture driven by the embedded subsidies that support the industrial-era dream – a dream that equates physical consumption with personal fulfillment. So every efficiency gain gives us even more capacity to consume, and obsessively, we do. But our culture is changing, and our dreams are too. In the industrial world, it made sense to drive consumption, to overcome poverty. In a world where the fundamental resource – information – is both renewable and regenerative, where each information transaction results in more on both sides of the equation, we may come to value what makes us each different, not what makes us the same. 26  

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We may well find that our purposes are better served not by competing to have the most stuff outside ourselves, but by collaborating to draw the most from inside ourselves, and give it to the world. In ways that no one yet fully knows. How to Restore Prosperity: Two Systems That Drive Innovation Politicians love programs, because programs win elections. If people are hungry, programs give them food. If they are poor, programs give them money. If an enemy attacks, programs exact revenge. If people are out of work, programs give them jobs. Programs enable politicians to deliver specific results to constituents they want to serve. Programs are proof points they use to convince voters and contributors they are doing their jobs. Republicans, whose worldview suggests that people will be selfish unless disciplined, like programs that discipline people. They spend tax dollars on police to fight crime, on the military to fight wars, and on border patrols to keep out poor illegal immigrants desperate for a better life in a better system. Democrats, believing that people will be selfless if liberated from all constraints, like programs that support people. They spend tax dollars on public schools to teach children, on jobs programs when people are out of work, on social security and welfare when they need more money, on Medicare when they need better health, and on open-border immigration regardless of the strains that may be placed on existing resources and infrastructure. These programs may be necessary, at least temporarily. But the assumptions underlying them are not always 27  

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correct. People are a mix of selfish and selfless. Our programs and systems need to reflect that. Programs cost money, and sometimes there is not enough money to pay for all the programs we might like, especially as they accumulate over the years. Systems are needed that drive prosperity by empowering and rewarding people to create it. Systems are different from programs in three important ways: First, systems are wholes. Programs are parts. Second, systems create value. Programs consume it. Third, systems always pay for programs. Every system has qualities that are absent in its parts. These qualities are sources of new net value. When atoms and molecules join together in a cell, new value emerges: life. When cells join together in a human body, new value emerges: thought, consciousness, and everything that follows. In society, when people come together to meet their collective needs, new value emerges: families, communities, businesses, economies, nations, civilizations. Each part in these systems imposes net costs. Those costs can only be sustained because, together, the emergent qualities make the whole system sustainable. Parts can’t pay for themselves – ever. They lack the emergent qualities, the net value creation. Programs can only be paid for if they are part of larger systems which generate the net revenues. A tax program can’t be paid for unless it is part of an economic system which generates wealth. A health program can’t be paid for unless it is part of a system which cultivates health. 28  

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An education program can’t be paid for, unless it is part of a system that fosters knowledge and learning. Programs are often necessary – they meet essential needs. Often, they are essential parts of larger systems. But they cannot be paid for without systems. The two systems that pay for all programs – in fact, the two systems that pay for everything – are the economy and the ecosystem. These two are the root source of all prosperity. We don’t need to drill-baby-drill or spend-baby-spend until their sustenance is dry. We can harness their capacity to create value, by design. But our economy suffers from two major breaks in the flow of feedback that drives innovation and creates value. These two massive subsidies, enshrined by government and supported by vested economic interests, retard genuine growth by concealing key costs of doing business. They artificially repress the feedback signal that drives innovation. The economic subsidies come in the form of massive government spending, championed by the left, and supported by demonizers and deniers who pretend that economic limits don’t actually exist. The ecological subsidies come in the form of massive environmental exploitation that takes the form of pollution, depletion, terrorism, insecurity, and war. These subsidies are championed by the right and supported by demonizers and deniers who pretend that ecological limits don’t actually exist. Through this massive double-dose of deficit spending, America is burying its children in both economic and ecological debt. It is time to stop spending down our prosperity, and learn again to replenish it. 29  

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Living within our means will not be so difficult as we imagine. In fact, it is the surest way to increase our prosperity. Every good parent knows this and cultivates it in their children. The benefits will be beyond anything we can yet fully conceive, because they will be delivered by an invisible hand with a green thumb. Fundamentally, the answer is not to start with expensive new programs or tough new regulations, commands, and controls. Before we consider any of that, we need to make sure the overarching system is designed to create sustainable value. Here are some ways we might start. Bill Shireman is the President and CEO of Future 500, and the author of the forthcoming book, “Bridging the Politics of Hate: Confessions of a Right-Left Deal Maker: How to Forge Impossible Coalitions between Conservatives, Liberals, Capitalists, and Activists.” www.Future500.org

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AN AGENDA FOR THE FUTURE Energy, Taxes, and Security For Our Great Grandchildren Former Secretary of State George P. Shultz Interviewed by Bill Shireman

BILL: It’s such a pleasure to be with you today and to talk about energy and security and other issues. You have had an extraordinary career, an understatement to say that. You began that career 70 years ago when you joined the Marines to fight in the Pacific. You left MIT after just being accepted there. You went back, got your PhD. You taught there. You were Dean at University of Chicago School of Business. You have since led Bechtel, you served as the first Director of the Office of Management and Budget. You have served as Secretary of Labor, of Treasury, of State. An extraordinary career. SHULTZ: How do you remember all of this? BILL: I know. It’s harder for me to remember, certainly. But you were one of those very few who helped to navigate the country through to the end of the Cold War and beyond. And since that time all has not been peaceful for the nation at all times. Is America more secure today than it was during the Cold War? SHULTZ: It’s more secure in the sense that we don’t have a huge enemy with an ideology being promoted that is at odds completely with our ideology and supported by a huge military force. So, the end of the Cold War did away with a lot of tensions. Probably the tension over the

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possibility of a major nuclear exchange. On the other hand, in some respects now, it’s more difficult, in some ways more dangerous, because in an odd way the Soviet Cold War presence was a unifying event. And it’s harder to hold things together now and there are a lot of terrorist problems around that were not present then. And we all worry that some terrorist outfit will get a hold of a nuclear weapon or the fissile material they need to build one and that can be a major problem. Now let me mention something with the Cold War. Because energy played a part in bringing it to an end. BILL: How is that? SHULTZ: The world lives on oil, as a basic source of energy. And during the Cold War, beginning around the mid-80s, the Saudis pumped a lot of oil. And there was quite a long period of time there where the price of oil I think was below the cost of producing it in the Soviet Union. So they had no foreign exchange.

I remember one rather poignant exchange between President Reagan and General Secretary Gorbachev. When President Reagan says, “How come you’re not buying any wheat?” That was the deal for them, to buy wheat. And Gorbachev said, “We don’t have any money.” So energy as a strategic resource is very important. BILL: So in some ways the abundance of energy, of oil in Saudi Arabia, was a major driver in the collapse of the Soviet Union. SHULTZ: Well that’s an overstatement. But it helped. BILL: It was a contributing factor. SHULTZ: Yes.

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Future 500 – The UnConvention 2012 BILL: Now I remember the Arab oil embargo. And I remember President Nixon in the face of that calling for energy independence by the United States. And I remember President Ford following suit with that, and President Carter after that. And President Reagan and President Bush and President Clinton and the second President Bush and now President Obama. Is dependence on foreign oil simply the problem that America can’t overcome? SHULTZ: No, we can overcome the problem. But let me go back in that history. For some reason when I was Secretary of Labor, President Nixon asked me to chair a Cabinet Task Force on the Oil Import Program. It was a quota system in effect. We couldn’t import more than 20% of the oil we used. The United States was a big producer in those days. Still is, but bigger then. And President Eisenhower had put it there, because he had reasonable credentials in the National Security field, so he thought that if we imported more than 20% of the oil we used, we were asking for trouble in national security terms.

So by 1972, I’m Secretary of the Treasury, and by 1973, as you noted, came the Arab Oil Embargo: Deny us oil to make us change our policies. I said to myself, “You know President Eisenhower had a point.” And furthermore, the price of oil skyrocketed and messed up our economy. And people came running around saying let’s think of alternatives. And I remember looking at these things and shaking my head. These people are talking pie in the sky, they don’t have anything to offer. So I’ve been worried about the issue ever since. And now, we finally have ourselves in a position where we can get control of this situation if we work at it well. 33  

Toward a New Agenda for America BILL: How can we do that? SHULTZ: Well there are two ways. First of all there is a new technology for exploiting gas and oil in shale formations called fracking. And it has changed the landscape dramatically. Not only in the United States but elsewhere as well. There are problems connected with using it. And I think it’s really important that we understand these problems well and we deal with them effectively. As I have understood it, the problems are solvable, but you have to confront them and deal with them. If we can do that, we’ve already seen that we now have huge natural gas supplies. The price of natural gas has plummeted. It’s more stable and it will be used for all sorts of purposes, maybe even including transportation at some point. And also there is a bit of an oil boom going on in the United States. In North Dakota and Southern Texas this technique is being used and for the first time in a long while the production of crude oil in the United States has risen a little. BILL: We’re beginning to see increases in the domestic… SHULTZ: We’re beginning to do that, and I think between what’s produced in Canada, Mexico, Brazil, and Argentina, I don’t think there’s any doubt that our hemisphere can produce all of the oil and gas that we need. Now that doesn’t mean the prices aren’t world prices, so the prices can go up and down. But we’ll still control supply.

There’s a second thing, however. And that is always, before I mentioned the first Arab Oil Embargo, prices go up, people get excited, then what happens? Prices go back down, and everything stops. We’ve been through that cycle about 3 times now. And this time we have much more going on in research and development about energy. 34  

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It’s going on at Stanford. It’s going on at MIT. It’s going on at Georgia Tech, Cal Tech, all over the country. Very gifted scientists and engineers are working on this and they’re getting somewhere. So, let’s say that what I said earlier about oil and gas turns out to happen. We can’t let that shut off this R&D again the way it has before. We have to keep going and do the research necessary to really make solar and wind energy very competitive. To learn how to produce energy where you use it to a much greater extent. The military’s very interested in this. So there are all kinds of things that are going on now and we need to keep the pressure on to have those continue. BILL: So this is our one additional opportunity that we have historically to make a transition? It sounds like it’s not necessarily a time to simply exploit the resource, but to use the resource to help transition us to … SHULTZ: Build. Absolutely. And we’re working on that here at the Hoover Institution and at Stanford and we hope we’re going to make a dent. BILL: Yeah. Now you’ve talked about a tax shift as an idea that contributes to this. Tell us about that. SHULTZ: Well, you would want to have all forms of energy compete on a level playing field with each other. Which means that they have to cost their full costs, whatever they are. Much of the costs, more in some forms of energy than in others, is right there in the production process. But in some, a lot of it, it’s not there. Particularly anything that pollutes the atmosphere badly, so that your health is threatened.

Or you contribute to the problems of global warming. And so we think that the cost of those things should be priced into that form of energy. And there’s lots of different ways 35  

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of doing it. Most of us around here think the right way is a revenue neutral carbon tax. That is, the carbon is what is polluting. So you charge for that and that has to become part of the price for that form of energy. And you make it revenue neutral, so the tax is not a drag, fiscal drag on the economy. And people can’t say you’re just another way of getting some money for the government to spend in one way or another. BILL: Smarter taxes? SHULTZ: Well, what we are researching out is one of the ways in which you can impose the tax most effectively. Probably the answer to that is fairly near the source, rather than the use. And how can you distribute it in such a way that it really is revenue neutral. And my own inclination is to distribute it in a visible way to people.

There’s an interesting case study right now in British Columbia where they’ve imposed a revenue neutral carbon tax. It’s fascinating to see what they’ve done. So we’re trying to study that one really carefully. But the way that they make it revenue neutral is to distribute the money to you personally as your carbon dividend. You get a check. You get a deduction from your tax. And you do it yourself. BILL: So you can see it. SHULTZ: So you feel it. So you say hey, this carbon tax is a good thing. I get a dividend out of it. BILL: Yeah. Terrific. Now there’s some that say carbon isn’t a pollutant. So we shouldn’t be taxing carbon. Is carbon a pollutant? What do you think? SHULTZ: Yes, it is. BILL: Yeah?

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Future 500 – The UnConvention 2012 SHULTZ: I mean where have they been? I’ll tell you something you should do if you feel otherwise. Go to China. Spend a little time in Beijing. You almost don’t dare go outdoors. Because the pollution is so heavy. And people can’t live with that. BILL: You’re here at Stanford and Stanford is in the heart of Silicon Valley. If Saudi Arabia is the world’s capital for energy, Silicon Valley is certainly the world’s capital for information and communications technology. We’ve talked about the importance of solar and wind power. In addition to that, you have companies here like Cisco, Intel, HP, Google, Facebook, who are really leading the charge on information-based and telecommunications technologies. Is there a role for them? Are they part of the solution to our dependence on oil and foreign oil? SHULTZ: Well certainly the use of these powerful computing techniques is something that can help in a variety of ways in developing our energy sources. And interestingly there are some people over at the Livermore National Laboratories, where they have the world’s most powerful computer or one of the world’s most powerful computers, and one of the things they’re doing is using that power of computing to help sort out possible ways of using as well as obtaining energy. You know what the biggest source of energy is? BILL: What? SHULTZ: More efficient use. BILL: So efficiency itself is a source of energy? SHULTZ: Huge. Because if you can do the same thing with a lot less energy. There you are.

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Toward a New Agenda for America BILL: I was speaking with a leader on the East Coast who you know well yesterday, who was saying that what we really need to do is set a national goal. And his goal was 3%. He said we should be improving our energy productivity 3% every year. We should be using that to cut our dependence on foreign oil 3% a year. That 3% would be a challenge to our technology sector to come into the economy and improve our productivity every year. And that would create the kind of oil glut at the global level that would give us more control over pricing. Does that sound like a reasonable formulation? SHULTZ: I don’t have any feel for whether 3% is the right number. But I do think it helps often to set a goal, that’s realistic. Because if you set a goal and really mean it, then what does that cause you to do? It says we’ve got to figure out how we’re going to get to that goal. What are the different things we need to do. And you’re thinking more explicitly about those things and you’re working harder to get them to happen. I’ll give you an example. It has become clear that there are ways to make existing buildings, let alone new buildings, much more efficient in their use of energy. And in many ways now, you can show that it pays dividends for a company who owns a building to make it more energy efficient. Pays dividends in the sense that in the cost of doing it they get their money back quickly. So in effect they get a good rate of return on that investment. But it isn’t happening anywhere near as fast as a lot of us think it could and should. So we’ve got to stimulate that process. That’s just one example of how you can use energy more efficiently. BILL: Now, we are in a situation nationally where there is a tremendous amount of adversarialism in politics and gridlock at the Congressional level and at the Executive

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Branch. I remember you telling stories of President Reagan in a situation where there was a great deal of division between right and left, but at the same time he would get together with House Speaker Tip O’Neill and talk about this. What’s the difference between that time period and what the two parties are engaging in today? SHULTZ: Well, I’m not there. I haven’t been in Washington for a couple of decades, so I can’t really…a lot of what I read and occasionally go there and feel is strange to me. When President Reagan was asked if Tip O’Neill was his adversary he said, “Not after 5 o’clock.” That’s when they cut their deals. And we had a problem-solving atmosphere in those days. I was complimented. On the day before I left office, the Senate of the United States had a luncheon for me, and it was organized by Dick Lugar, a Republican, and Ted Kennedy, a Democrat. And George Mitchell, the Democratic leader, and Bob Dole, the Republican leader, sort of chaired the event. And I told them how much I appreciated all the advice and they told me how much they appreciated all the consultation. They gave me a little award which is sitting over there. And it was a nice occasion. But it was a way of kind of symbolizing that those were days when we confronted problems that we faced, and then we said okay, what’s the best way to deal with them, and then we got in a lot of arguments about what’s the best way, but still we were all trying to solve a problem that we know we had.

So I think what is needed in Washington and what is needed in Sacramento and other places is a problemsolving approach. I’ll give you an example. I was in Colorado recently. In Vail. There was an energy conference there. The Governor was there. And we’d talked earlier about the fracking technology. And he said, well we know 39  

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that we have a lot of good shale deposits in our state. And we know that there are problems. So he said, I got the company that’s going to exploit a lot of these, Haliburton Company, a drilling company, and the Environmental Defense Fund, who know a lot about the problems together, and said okay, let’s put all the problems on the table and then let’s see how you can solve them and let’s get the company to abide by these regulations in effect, and go to work. So that’s what happened. He didn’t just say ‘let things happen, we’ll see what happens.’ He got together with people and solved problems. And that’s what we need. BILL: That’s been a signature of your career, at Labor, at Treasury, at State. I remember, we all of course remember that President Reagan was not one who would shrink from calling it as he saw it. And he called the Soviet Union the “evil empire.” He said its leaders couldn’t take any action SHULTZ: I remember. When he said that “evil empire” people were wildly shocked. And Paul Nitze, who I had the pleasure of working with, was testifying before a Senate Committee. And he had been around a long time. He’d worked for a Democrat and Republican administration, a wonderful man. And all of the Senators, particularly the Democrats, were belaboring about him, about the President’s statement. And one, at the end, said to him “Paul, how can you work for an administration where the President says the Soviet Union is an evil empire?” And Paul said to him, “Senator, have you considered the possibility that the statement might be accurate?” Ended the hearing. BILL: Now it’s interesting. We have evil empires certainly still around the world. You advised President Reagan to

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establish an informal, personal relationship with Secretary Gorbachev. And that has been credited with opening the way that led to landmark agreements for the Soviet Union, including the intermediate nuclear test agreement in 1987. What was it about an informal relationship that you thought might be useful to bringing about change? SHULTZ: Well, what it was, was a relationship where each of them came to respect the other. They’re very different personalities. I got to know, of course, President Reagan very well, and Gorbachev quite well. He’s still a friend. But underneath it was a lot of substantive work that was done by people in both governments. And all sorts of interesting things that were part of that process.

But I remember the first meeting between the two Presidents was in Geneva in 1985. And it was, the first meeting, was in our quarters. It was a protocol point, you would meet this back and forth and we were the hosts the first day. And we had by common agreement agreed that the first thing that would happen was the two leaders would meet by themselves. And we thought maybe 10 or 15 minutes. So they go into this little room that we had set up with a fire going and they sit and the meeting goes on 10 minutes, 15 minutes, half an hour, three quarters of an hour. There’s always a guy in these things whose job it is to go in and stand and make it clear that the time is up. So this guy comes around to me and he says, gee, I’d better go in and keep this thing on schedule. I said, “Are you out of your mind? The whole point of this is to have these two people get together by themselves. The longer they spend the better it is. So if you go anywhere near that door I’m going to knock your head off.” 41  

Toward a New Agenda for America BILL: Now that’s an attitude that I think isn’t always shared domestically politically, or internationally politically. I was speaking with a Congressman a few weeks ago who said that he was having a conversation with a member from the other party at the elevator at the office building and it was an extended conversation. And his party leader saw him engaged in this apparently positive conversation and took him aside later and said, “No, no, no, this is not the way we do business here. This kind of fraternization across party boundaries is not the way to do business here.” And he was quite taken aback by that. We also hear of folks who say that we should not be engaging with what some would consider today’s evil empires: Iran and other nations. How do you make a decision? When is it a positive thing or a negative thing to engage with those who you perceive, in reality or not, to be your enemies? Diabolical enemies? SHULTZ: Well, you engage. But you engage when you can engage in your own terms. Not their terms. So we need to construct a situation where we’re in the driver’s seat.

That’s when you engage. If you go to a negotiation with no power on your side, you’re going to get your head handed to you. So don’t do it that way. BILL: Ah, now historically probably the pinnacle of that example is Reykjavik where the President and Gorbachev reached a stunning agreement, or nearly so. That really changed the path of history. Describe a little of that. SHULTZ: Well here we are in Reykjavik. The site was chosen because Iceland is an island away and isolated, so it wouldn’t have a lot of intrusions. And Hofdi House was picked by the security people on both sides because it was off by itself on the shore. Desolate. A little house. So we go

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in and there’s a small room that’s not very large, and a table. At one end sits President Reagan, at the other end sits Gorbachev. I’m sitting beside President Reagan. My counterpart, Eduard Shevardnadze, is seated alongside Gorbachev. There are note-takers and interpreters of course in the room, but basically it’s four people in the room. And we were there for two days. Basically what came out of it was agreement on what became the INF, the Intermediate Nuclear Forces agreement. That was all basically done. The strategic arms agreement was basically laid out there. Reductions by half to equal levels. The Satisfactory Bomber Counting rule, that was all done there. For the first time, there was a formal agreement from them that human rights would be a legitimate regular item on our agenda, which was really very important. Then, of course, they agreed that it would be a good thing if we could get rid of nuclear weapons altogether. Get rid of ballistic missiles altogether. But all that was never, it wasn’t consolidated there because of a difference of opinion over the desirability of pursuing an ability to defend against ballistic missiles. But once things are on the table, you can’t get them off the table. They’ve been put there. So these things gradually came into being. And a bunch of us here now are working hard to see if we can’t move the world to get free of nuclear weapons. So the idea is still there. BILL: That’s terrific. Well the reason for this interview, and a big portion of the interview that will be shown, will be shown for the first time at an event on October 2 and 3 called the UnConvention. And this is an event by Commit! and Future 500 that draws together folks from across the spectrum. From the right to the left. We’ll have folks like David Stockman there, we’ll have folks like Bobby

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Kennedy there. We’ll have leaders from business, about 500 senior corporate executives from Fortune 500 companies and we’ll have folks from the advocacy community, human rights, environment and so on. What would you offer as your welcome to those folks as they come together to discuss issues from a right to a left perspective and try to come forth with solutions that could be handed to whichever administration enters the White House on January 20th of next year? SHULTZ: I would have some very clear advice for them. Step 1: Identify what the problems are that you think need attention. Then, start talking about what you can do to solve those problems. Simple. BILL: Yeah. When it comes to energy, is there anything that comes to mind that you would challenge the business leaders that are there, who have all come with the understanding that their role there is to make commitments to the future? What would you ask senior corporate executives to do in the area of making commitments around energy? SHULTZ: Well, some are not involved in producing energy, but all are involved in using it. So I would say to them, in your own interests, from the standpoint of your stockholders, learn how to use energy more efficiently. Be willing to pay attention to the subject and invest in the subject.

It’s always amazing to me what happens when a subject that hasn’t been on your mind suddenly is on your mind and you see all kinds of things you can do that you didn’t think of before. For instance, we had a man here who was a commander in the Navy. He was a pilot. And he said, I’ve flown a lot of missions in Afghanistan. Every pilot knows 44  

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you can go down. So if I go down, he pulls this, he carries it all the time, he pulls this out of his pocket, so if I go down, I pull this out of my pocket, I turn it on, and my friends know where I am. Only problem is, it only lasts 48 hours. So then he pulls another little gadget out of his pocket. It’s little solar reflectors. He says, I can pull these out and I can recharge this thing. It’s called creating energy where you use it. So, necessity causes him to think of things like that, and the Pentagon to think of things like that. But there are all kinds of things you can do. I once had an office in a building in San Francisco. And we had a big electricity crisis in California. I don’t know, 5, 6, 7, years ago now, I don’t remember when. So everybody wanted to save electricity. So we turned the lightness, the brilliance of the lights in the corridors down a little – perfectly okay, you could see okay. Then be sure that when somebody wasn’t using an office that the lights were turned off. So don’t come in every morning and turn all lights on routinely. If the office isn’t being used don’t turn the lights on. If somebody leaves, turn ‘em off. We saved 13% of the electricity we used. And nobody was inconvenienced. All it took was thinking about the subject. So the people who aren’t energy producers can think about this subject and save and then efficiency is a form of energy. And then I think the ones who are in the energy business can be sure if they are producers of oil and gas to do it responsibly, so that we don’t have any blow ups. We don’t need any more Deep Water Horizon type problems. So be careful and do it right. And in the long run that will pay off for people. And for the people who are critics all the time, 45  

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well, state what your problems are and let’s get them solved, so we can go ahead and proceed and do what we need to do. BILL: Yeah. We’ve talked to a number of companies about your ideas of a tax shift, and a lot of them like the idea at least on a personal level, and on an unofficial corporate level with support. But they tell us as far as it being a priority in Congress, their government affairs folks tell them, don’t use our chits on something like that because we’ve got high priorities specific to our company and we need to use our chits on those. What would you tell those companies about using some of their chits for a tax shift with other energy policy that’s necessary for the nation? SHULTZ: Well you’ve got to make it clear to their stockholders that they have a stake in having solutions to these problems. I worked hard on a campaign here in California recently on this issue. And one of the ads that we had was cut by a woman who was the head of the American Lung Association. And she looked like your mother and she said be careful about the air you breathe. And it was very effective. Because if my mother tells me to be careful about the air, I say, “well okay, mom.” I’ve got to do something about it. BILL: You still maintain a very active professional life and social life. And you’re working on a few issues that you want to advance. What would be the most satisfying policy or program victory that you could see in the years ahead? What do you want to accomplish in the years immediately ahead? SHULTZ: Well in my office I have a lot of pictures of my great-grandchildren, who are babies right now. So I live in the future. What I’m doing is all about them. I think you

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have to cause yourself to look at things strategically. And yes, there are all kinds of things day to day that people have to worry about, but unless you have a strategic focus, you’re not going to really do right by your greatgrandchildren. So, in everything I do I try to keep them in mind. BILL: That’s terrific. Well, it’s been a pleasure and an honor to spend this time with you. I’m sure you’re told that a lot. But you have an inspiring effect on the people that you speak with and it’s one of the great, I think, privileges to be in the position like you are, to be able to affect people in the ways you do. And you clearly understand and relish that. So thank you for the work that you do and for the work that you are continuing to do and for the effect that you are having on your grandchildren and our grandchildren. SHULTZ: Thank you. But remember one thing. The name of the game is to solve problems, not create them. George P. Shultz was Secretary of State during the Reagan Administration from 1982 to 1989, a Professor of International Economics at Stanford University Graduate School of Business, and is a distinguished fellow at the Hoover Institution.

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AN ECONOMIC PROGRAM FOR THE FALL CAMPAIGN AND THE NEXT FOUR YEARS by Robert J. Shapiro

With the presidential election turning on the economy, the debate has focused on what’s right or wrong with the current recovery, and who’s responsible. They agree that growth is too slow and deficits are too high; and unsurprisingly, President Obama blames the GOP for both while Mr. Romney blames the President. The President’s arguments are stronger, especially given Romney’s risible claim that he can balance the budget and cut taxes another $5 trillion at the same time. The larger point is that the high deficits and tepid expansion are legacies of the financial meltdown, and resolving them would only allow economic policy to finally move past 2008-2009. The next stage of the economic debate, then, should focus on the two critical issues that have bedeviled middle-class Americans for more than a decade – namely, historically-slow jobs growth, and stagnating incomes. A presidential campaign can accommodate only a handful of big ideas. Here, then, are three new policy initiatives to help reignite job creation and income gains: (1) reduce the cost of creating new jobs by reforming payroll taxes; (2) restore the foundation for middle-class wealth by stabilizing the housing market; and (3) enable everyone to become more productive by providing 49  

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universal, low-cost access to college education and worker training. Tax reforms offer the best way to reduce the cost of creating new employment and keeping those already employed in their jobs. The focus of such reforms is not the tax on corporate profits. Yes, the corporate tax is an inefficient mess, but reforming it will do little for those looking for work. The right target for job creation is the payroll tax, because it directly increases the labor costs of every employer. The idea here is to stimulate job creation and employee retention by cutting the employer side of the payroll in half, and on a permanent basis. And we can replace the revenues lost to Social Security with a carbonbased pollution tax. The second idea could help address slow job creation and the slow expansion, as well as widening inequality. Employers have been creating relatively few new jobs not only because of the cost of doing so. Employers also are not confident about when Americans will begin to spend again like they used to, creating the demand for the goods and services which additional workers could produce. The simplest way to boost demand is more budget stimulus – and good luck with that. A more efficient way, however, is to remove any factors holding back normal consumer spending. It’s not unemployment, with the jobless rate already down from 9.8 percent to 8.2 percent. Rather, what continues to hold back tens of millions of consumers is the hard fact that the housing bust has left them substantially poorer. So far, the bust has cost most homeowners one-third of the value of their homes. This is a big deal economically, because home equity is the main form of wealth or saving held by most of the middle class. Consider the following: 50  

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The bottom 80 percent of Americans, measured by income, own just 7 percent of the value of the country’s financial assets – but they also hold 40 percent of the value of all residential real estate. The sharp drop in housing values, therefore, wiped out most or all of the home equity built up by tens of millions of Americans. Before most people begin spending again at the rate required to boost business investment and hiring, housing prices have to stabilize and begin to move up. Washington spent more than $1 trillion to stabilize the financial markets, which generate most of the wealth of the top 1 percent to 20 percent of Americans. For much less, we can stabilize the housing markets which generate the wealth of everybody else. The most direct way to do this is to keep people in their homes by bringing down the current abnormally-high foreclosure rates. Fannie Mae, which taxpayers now own, could extend low-cost, twoyear loans to millions of homeowners facing foreclosure. The funds could be used only for mortgages held by Fannie Mae. And to control the moral hazard lurking in such relief, 20 percent of any capital gain earned from eventually selling those homes would go back to taxpayers. The third initiative would ensure that everyone can build the skills needed to earn a rising income by providing lowcost access to college education and worker training. First, we could replace student loans with an expanded and upgraded form of national service: Two years of service in the military or the Peace Corps, or three to four years service in Americorps, would earn any young person instate tuition at a public college or university for four years. Young people considering college would be asked to give something of themselves back in service to the country, 51  

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and would no longer have to face huge debts that can take decades to work off. In addition, every working American should have access to additional training in the information technologies integral to virtually all industries and jobs. The plan here is one that Mr. Obama supported when he was in the Senate – provide grants to community colleges to keep their computer labs open and staffed in the evenings and on weekends, so any adult can walk in and receive free instruction. This agenda is forward-looking rather than presentoriented, so it does not address the deficit. In truth, everyone knows perfectly well what to do about it. Simpson Bowles, Domenici-Rivlin, the Senate Gang of Six all rely on the same formula: Raise new revenues, reform Medicare and Medicaid, cap discretionary spending, and reduce defense spending. This approach, which President Obama supports, broke the deficit logjams in the 1980s under Ronald Reagan and the 1990s under Bill Clinton. The only thing standing in its way today is the intransigence of extreme conservatives who would rather see the U.S. default on its sovereign debt than consider raising taxes. We can only hope that the public will continue to rally around this balanced approach and convince House Speaker John Boehner and Senate GOP leader Mitch McConnell. Once that is done, we can turn to the real business of restoring jobs and income gains. Robert J. Shapiro is the Chair of NDN's Globalization Initiative, since its inception in early 2005. He was the Under Secretary of Commerce in the Clinton administration and economic advisor to the Clinton, Gore and Kerry presidential campaigns. He is also the chairman of Sonecon, a private economic policy consulting firm. Published June 4, 2012 – www.ndn.org

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MAKE IT, TAKE IT When No One Owns Their Environmental Impacts, Everyone Loses by Robert F. Kennedy Jr.

When

I decided to dedicate my life to protecting the environment through groups like Riverkeeper, NRDC and the Waterkeeper Alliance, I considered recycling a small and slightly boring part of the solution. But the products and packages we consume cause 44% of America’s greenhouse gas emissions, according to EPA data analyzed by the Product Policy Institute. And the potential to adopt a rational, free market based solution may provide the lowest cost bulwark against global warming with the highest potential for jobs generation and for quickly jumpstarting American prosperity. You see, America’s waste issues are rooted mainly in America’s irrational and rather un-American practice of subsidizing waste disposal. Riding happily on this gravy train of corporate socialism, most of the nation’s top consumer product giants have so far refused to acknowledge their responsibility or expressed any willingness to pony up. They gleefully accept taxpayer willingness to fund the disposal of their waste and contribute lavishly to politicians who endorse this “free ride for polluters.” They want to privatize the profits of waste, but socialize the costs.

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When we subsidize waste, we penalize recycling and damage the environment. That is why America’s recycling rate is often half of those of Europe and Canada. Today, most Americans want to recycle – yet well over 65% of our packaging materials still end up in taxpayer funded landfills and incinerators. This system is costly – adding to our governmental fiscal crisis. Subsidized waste disposal diminishes quality of life and is, frankly, un-American. Meantime, we throw away enormously valuable material – estimated at nearly $11 billion per year by As You Sow. When we throw away recyclables, we throw away jobs. Recycling creates 20 times the jobs that simple disposal does. If this country recycled 75 percent of its packaging waste by 2030, we could create 1.5 million new jobs, according to a report recently issued by the Blue-Green Alliance, a coalition of environmental and labor groups. American manufacturers – from paper mills to metals plants to plastic makers – urgently need more recyclable materials. Some have even closed plants, taking good jobs with them to foreign countries, because they can’t find affordable feedstock here. Their customers frequently shift to undemocratic nations with abysmal environmental and labor records. The nations that lead the world in recycling have embraced a simple concept: Extended Producer Responsibility, or EPR. Under EPR systems, brand owners are responsible for the end-use costs of packaging, instead of taxpayers and ratepayers. The brand owners then internalize the cost of recycling in their products and packages. Brands that reduce their packaging footprint save money. Those that don’t are penalized. Materials are almost always collected at a lower per unit cost, as the producer-run organizations achieve efficiencies. 54  

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EPR rewards the smartest entrepreneurs, inventors and designers. Smart companies make more money while serving the public interest. That’s the way free market capitalism is supposed to work. And with public budgets shrinking in this country, the time for EPR has come. To mobilize support for EPR, my colleagues and I have formed a new organization, Recycling Reinvented. Our simple objective is to ensure that America adopts EPR – that process begins when America’s top brand-name companies take responsibility for their waste. There are manufacturers who support our aims. But only a few responsible companies have stepped forward publicly. They include some of our nation’s most prominent companies, including Nestle Waters North America, the continent’s leading bottled water producer. Nestle is leading the charge with visionary and courageous leadership for industry-wide reform. And a handful of other companies, including Coca-Cola, have also worked to advance EPR. But nearly all the other top 25 brands have steadfastly refused. Despite this resistance, the EPR train is gaining momentum and will not be stopped. We are optimistic that soon there will be simply too many CEO’s who refuse to put their short term profits and shortsighted strategy over their duty to our country and our children. Robert F. Kennedy, Jr., is the Founder and President of Waterkeeper Alliance, and is a Professor at Pace University.

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END TAXES AS WE KNOW THEM Stop Taking Prosperity Start Taking Responsibility by Bill Shireman

None of America’s major parties, not even the Tea Party, seems ready to step this far. But soon, America needs to look seriously at much more fundamental tax reform than the right or left have yet acknowledged. We need to wind down all taxes that drive down innovation and prosperity: taxes on income, payroll, profits, and savings. We can’t end all taxes. Critical programs need to be paid for. But many can be, with a wiser set of tax alternatives. We also can’t ignore the nation’s $50 trillion in short-term and long-term debt. Like it or not, defaulting on that debt would impose pain and suffering on billions of people. We need to pay our debts, and taxes are part of the way – but not our grandparents’ taxes. Today’s U.S. taxes are built on a faulty 19th and 20th century foundation. We tax well-being. Anything we tax, we get less of. That’s one reason conservatives object to high taxes. Economists once thought of these taxes as relatively neutral. They were less distortive because they applied to almost everyone across-the-board, creating a level playing field. But when you tax prosperity, then use the proceeds to pay for the negative externalities imposed by businesses 57  

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and individuals, you promote a system that privatizes profits while socializing costs. You undermine corporate and individual responsibility. You penalize cost-cutting, efficiency, and innovation. Free market advocates propose alternatives that might work better: Establishing new kinds of property, with associated rights and responsibilities, for example. Taxing externalities, like pollution and waste. Assigning ownership to costs as well as benefits, so taxpayers and consumers, as a whole, aren’t forced to pick up the tab for someone else’s actions. Today’s tax programs take money out of our pockets, and give it to the government, which takes a hefty portion, and returns what’s left to us, only with strings attached. Traditionally, these taxes are imposed on things we want – on income, jobs, profits, and savings. But these levies have a major distorting effect: they tax prosperity. They discourage work, thrift, and investment. They tax things we want, not things we don’t want. Today, some economists favor a national sales tax, called a Value-Added Tax, or VAT. They argue that a VAT taxes consumption. But in reality, a VAT tax just perpetuates the problem, by taxing value directly. A smarter tax would target the actual consumption of energy and resources, through a broad economy-wide tax shift to the pollution content of energy. The purpose of this tax reform would be not just to raise revenue, but to directly drive innovation, create jobs, promote growth, and reduce pollution. The result would not be higher taxes, but gradually lower ones. Everything we tax, we get less of. So as we tax pollution, we reduce it.

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Of course, politicians could still raise taxes – but the political odds would finally be stacked against that. Today, taxes rise automatically, in two ways. Inflation and prosperity combine to push people into higher and higher tax brackets, increasing government’s share of total income. If we tax “bads” instead, the reverse would be true. Politicians would be required to vote on any tax increases, again and again – and incur the political risk of doing so. Here are five key components of a pro-innovation tax and energy system, built not on the cycle of tax-and-spend, but on smart tax reform that would raise revenues while it solves problems. First, Set a National Innovation Goal: to increase the productivity of energy and carbon by 3-5%, every year, for 50 years. Second, Stop Taxing Jobs and Prosperity. Cut payroll and income tax rates for individuals and corporations. Third, Develop the Next Energy Economy. Rather than simply depleting our energy savings, we need to develop and increase them. Our abundant stores of natural gas must be harnessed, in environmentally safe ways, to provide a bridge to more advanced technologies. Our dependence on polluting coal and imported oil need to be systematically reduced. Above all, our most abundant source, Digital Energy, must be increasingly tapped. Fourth, Tax Pollution, Not Prosperity. Put a price on fossil fuel pollution, set at the rate that will drive the 3-5% annual productivity gain. Fifth, Use Border Adjustments to Cut Taxes More. Apply the pollution tax to imported goods – including oil imports – so we don’t inadvertently subsidize China,

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Venezuela, or Iran. Use 100% of the proceeds to cut other taxes. That simple pro-innovation system will create wealth and jobs, increase payrolls, reduce pollution, promote technology development, and finally begin to wean the nation off our addiction to foreign oil. It requires zero net tax increases. It starts out revenue neutral, and as pollution declines over time, it drives a gentle but continuous reduction in taxes overall. The pro-innovation system will also eliminate the need for federal regulation of carbon emissions, and reduce the need for regulating other pollutants. Pollution taxes can outperform any rule EPA can enforce. It can provide a framework where every form of energy – from coal to gas to solar – can compete on a level playing field, with environmental costs already internalized. The pro-innovation system will reduce consumption, without requiring that we sacrifice well-being. It will drive technology change and help restore our manufacturing sector by improving efficiency and productivity. It will harness what America does best – innovation – and help strengthen our economy for our coming race with China. It will cut the flow of dollars to Middle East and Venezuelan dictators, and reduce the chances of conflict. It will protect our sons and daughters from the perils of war. The pro-innovation system could readily be broadened to include many opportunities for the left and right to join forces. Health Care Systems that empower, enable, and reward people to stay healthy, and channel part of the gain from that to support programs to help those who face potentially catastrophic health challenges. Systems that outperform standardization and consolidation, by 60  

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encouraging specialization and integration, in smaller local enterprises that continuously improve and master their specialties, so they can deliver the best results at the lowest cost. Public Education Systems, with robust, adaptive public schools available to all, that foster knowledge and learning, through small enterprises focused on developing their specialties, within a robust integrated market, so they can deliver the best results at the lowest cost. Systems that can compete with big, consolidated programs, to provide the impetus for continuous improvement that can make our public schools the best anywhere. National Security Systems, that cultivate freedom and prosperity here and invite it abroad, building peace through mutual interdependence, and enabling us to keep our soldiers safely at home, preserving our military resources for when war is truly necessary. A Right-to-Left Alliance for the 21st Century The Republican and Democratic Parties symbolically represent the two idealized roles of American parents. The Republicans position themselves as the nation’s father figure. The Democrats play the nation’s mother figure. In a healthy union, these two work together to provide what the family needs. The feminine represents purpose – the “why” – while the masculine represents power – the “how.” In the real world, mothers and fathers each play both masculine and feminine roles. But the mother tends to be the connective force, representing the higher purpose of the family as a single unit that shares love and support for one another. The father, on the other hand, represents the power that is exerted to advance that purpose. The masculine serves the feminine; power serves purpose. 61  

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For generations, we have chosen between the policies of the right and left. This has left us paralyzed, frozen in place, even in the face of potentially disastrous economic and ecological consequences. Before we can move forward, we must look to the left and to the right. To understand the purpose of our representative democracy, look to the left. To understand our power, and how to use it to advance our purpose, look to the right. The blue states and the red – the political left and the right – can be reconciled, if we accept that both serve a function. The left can be, in part, the mother figure, the connective force that binds us together as a whole people, a national family. It represents our purpose. The right can be, in part, the father figure, the disciplining force that focuses on the use of power to advance the interests of the whole. It represents our power. But these two forces – purpose and power – are only functional when exercised together. The right and left may prefer one role, but each must also embrace the other. Power without purpose is abusive. Purpose without power is impotent. National leaders who exercise one of these without the other fail to advance our interests. George W. Bush focused on the use of power, but was blurry about what purpose he was trying to advance. Barack Obama has been fairly clear about his purpose, but not skilled in the use of power. Of course, the right and left are each a combination of power and purpose. But their true believers impulsively use their passion for their purpose to guide the exercise of their power. They believe, without thinking, that what they feel is what they should do – that the quickest path to their purpose is to use their power to force it into existence now 62  

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– whether that means taking people’s money or choosing their mates. That is dangerous. It is the source of their pathologies. It is why each falls too quickly for big government or big corporate non-solutions, and stands ready to sacrifice freedom and justice to save them. Concentrated Corporate Power, Concentrated Government Power, Or Neither? In 1980, Republicans argued that government had too much power – we needed to shift it from government to individuals. The major result: power shifted from government to entrenched business interests. In 2008, Democrats argued that corporations had too much power – we needed to shift it from corporations to individuals. The major result: power shifted from corporations to government. Both parties claimed to be returning power to individuals. Both instead passed it along to their favored institutions, and justified it by claiming that their institution better represented the interests of individuals. Liberals fear big corporations. Conservatives fear big government. Neither appreciates how similar, and codependent, those institutions are. By each focusing on just one, they shift power back-and-forth between them. In the end, they empower both government and corporations, and take power away from people. Big government and big corporate interests feed off one another. They grow big together. The more functions liberals give government to do, the more functions corporate interests end up controlling, through their power to influence and lobby. And the more functions 63  

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conservatives pry away from government, and give to big corporate interests, the more power they give right back to government – which crafts regulations that keep the big in power. That’s not because people in government or business are evil. It is because power is intrinsically selfish. If you give power to government, it will use it to seek more power. If you give power to corporations, they will do the same. Together, they maximize the power between them. Each time they struggle, it’s easier for them to take a little more power from people than from each other. It is quite possible that no amount of campaign finance reform will stop this. The dynamic is much deeper. Systemic change is required. In the old industrial economy, power shifted from individuals to big centralized companies and institutions. The payoff was a bigger paycheck. The cost was a relative loss of personal power. People learned to rely on government and corporations to protect them. Democrats sided with government to take on the maternal role; Republicans sided with business to provide paternal discipline. In an economy that favored institutional over individual power, the people seemed entitled to this protection. It was part of the social contract under which they traded some of their individual sovereignty. Today, that social contract has begun to break down. Our political parents are no longer able to assume their responsibilities. People need to take back some of the power they relinquished. The rise of the Tea Party on the right, and Occupy on the left, shows how people can increasingly undermine institutional power. Both movements have been partially 64  

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co-opted by old special interests. That’s unavoidable. But both also contain the seeds of a whole new right-to-left paradigm. They won’t agree on all the outcomes – they hold traditional right and left biases about nature and people. But they can agree on a new social contract, one that gives people greater freedom to make choices, greater opportunity to contribute their gifts to others, and greater responsibility for both the benefits and the costs. An old new idea is emerging to realign American politics again. It will force both the right and the left to set aside certain of their cultural preferences in order to advance the core. The idea – the one that defines America like no other – is personal freedom. A half-century into the digital age, Americans find they no longer need to squeeze into an industrial mold they don’t quite fit. They can be their own kind of father or mother, pursue their own kind of career, express their unique creative capacities, without sacrificing prosperity or suffering prejudice. Individuated citizens are much less willing to tolerate government or corporate control over an area of life. They want autonomy and freedom of choice. They question authority, doubt experts, and rely on friends, networks, or the Internet to help them make big and small choices. That is especially true for young voters. Growing up with the Internet, iPhones, and Facebook, with friends that are gay and straight, white and black, Christian and Muslim, today’s young generation is more fiercely dedicated to personal freedom than any in my lifetime. They don’t fully realize it yet – their expectation of freedom is as unconscious as my youthful expectation of prosperity. But technology has undermined centralized power and placed in their hands the tools to be free. These tools teach them 65  

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that freedom is natural and normal – they don’t have to fight for it. They assume they are free; they expect to be free; they own the idea, and they will drive it through technology, society, markets, and politics. The young, by and large, will not accept control by either the right or the left. They will reject the right’s regulation of their bedrooms and the left’s undue inquisitions into their board rooms. They will, by and large, embrace the purposes of the left – to reduce poverty, protect the earth, promote education – but not its bias for big government and top-down maternal solutions. They will, by and large, prefer to apply the power of the right – to harness the free market, assign rights, hold people responsible – but not its blindness to the limits of markets. They will know the difference between supporting free markets and subsidizing special interests. They will reach out, through government and church and whatever else works, to offer genuine help to those in need. But they will not allow government or the church to dictate who may marry. The process will be difficult. Freedom works because it liberates individual genius. It vests people with the power to advance their purpose. But it also envelopes them in an ocean of choices. Many people drown in their freedom. Unable to find their life’s purpose, they squander their power, increase it obsessively, or abuse it, damaging themselves and others. Responsibility works because it imposes discipline on freedom. It is a feedback loop that unites power with purpose. It says, “you own your impacts. Generate a benefit, and you gain more power to advance your purpose. Impose a cost, and you lose some of your purpose and power.“ 66  

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Revolutions mostly fail, if forced. They aim for systemic change, but end up setting things back. Systemic change does not have to be inorganic. It does not need to be forced or coerced. It can be natural and organic. In nature, fundamental change happens at threshold points, where combinations lead to the emergence of new qualities. In politics, the Tea Party and Occupy create a threshold opportunity. The left and right will not always agree, but they need one another. Liberal compassion is the heart of American politics – it tells us what we want to be. Conservative discipline is the means of American politics – it tells us how to get there. When we unite the “why” with the “how,” we gain the power to birth new ideas, and grow them to fruition. It is time to step beyond dependence on powers outside us, whether big government or big corporate interests. We can vest the power in ourselves, our families, and our communities. Bill Shireman is the President and CEO of Future 500, and the author of the forthcoming book, “Bridging the Politics of Hate: Confessions of a Right-Left Deal Maker: How to Forge Impossible Coalitions between Conservatives, Liberals, Capitalists, and Activists.” www.Future500.org

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Section Two

CRONY CAPITALISM How to End Right and Left Dependence on Big Government and Big Business

   

 

CRONY CAPITALISM AND THE CRISIS OF THE WEST In Italy and Greece, the most talented don't get ahead. That's also increasingly true in the United States. by Luigi Zingales

As Greece sinks toward a financial abyss – and Portugal, Italy and Spain sit on the edge – can we in the United States consider ourselves safe? Fundamental economic numbers offer little reassurance. At 8.6% of gross domestic product, the U.S. budget deficit is just under Greece's (9.1%) and equal to Spain’s. U.S. debt, at 103% of GDP, is just below Portugal’s – which first asked for a European Union bailout in 2011 – and 58% larger than Spain's, which might soon need one. Yet Americans should be concerned for a deeper reason. High deficits, high debt and unsustainable entitlements are symptoms of a common disease infecting Southern Europe and the U.S. That's crony capitalism, a problem with which I, having lived in Italy, am unfortunately familiar. Cronyism has a long history in Italy, where historically the Catholic Church enjoyed tremendous influence. Popes and other members of the hierarchy wielded – and often abused – enormous power, including that of placing their children and friends in positions of influence, regardless of merit. A truly competitive market has no place for favoritism, but when one company or institution dominates a market, such practices become inevitable. 71  

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In Italy today, even emergency-room doctors gain promotions on the basis of political affiliation. Instead of being told to study, young people are urged to “carry the bag” for powerful people in the hope of winning favors. Mothers push their daughters into the arms of the rich and powerful, seeing it as the only avenue of social promotion. The nation’s talent-selection process is broken: One routinely finds highly intelligent people employed in menial jobs while mediocre people often hold distinguished positions. Once an incompetent appointee finds himself in a powerful position, he tends to hire only subordinates of equal or lower quality, since more talented people pose a threat to him. After a few years, a firm’s human capital will become so eroded that it won’t be able to compete without some form of protection. The more protection it can gain from government, the greater the scope of the cronyism, which in turn makes protection even more necessary. Crony capitalism creates a vicious circle. Between 2001 and 2011, Italian per capita GDP dropped 4%. A low – or in Italy’s case, negative – growth rate makes it difficult to meet basic social obligations. When growth is high, it’s much easier to satisfy everyone without burdening future generations. But when the pie shrinks, the temptation to shift the burden onto someone else is irresistible – hence growing future entitlements and expanding budget deficits. During the 10 years of negative growth, the Italian debt-to-GDP ratio increased to 120% from 109%. The worst consequence of crony capitalism is political. The more a system is dominated by cronies, the more it generates resentment. To maintain consensus, the insiders

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must distribute privileges and subsidies – and the more they dole out, the greater the demand becomes. Traditionally, the U.S. has enjoyed a relatively honest democracy and transparent form of capitalism, which encouraged robust economic growth and contained the hunger for entitlements. This is less and less true. The U.S. tax code is filled with loopholes and special exemptions. Political connections increasingly count more than innovative ideas; young entrepreneurs often learn to lobby before they learn how to run a business. Seven out of the 10 richest counties in the U.S. are in the suburbs of Washington, D.C., which produces little except rules and regulations. Even worse, the slow growth and decreased social mobility of the last decade have damaged the free market’s reputation as a creator of prosperity. The hundreds of millions of dollars awarded for disastrous economic performance – from Robert Rubin’s salary as chairman of almost-bankrupt Citigroup to government loans for the actually bankrupt solar company Solyndra – have in turn weakened public belief in the system’s fairness. For the U.S., the moment to act is now, before the cancer of crony capitalism metastasizes. The tax code needs an overhaul that eliminates special treatment and bans any form of corporate subsidy – starting with too-big-to-fail banks. We must find ways to introduce more competition into sectors such as education and health care, while expanding economic opportunity for those at the lower end of the income spectrum. And we must curb the political power that large industry incumbents have over legislation. Not only does it distort legislation, it also forces new entrants to compete on lobbying instead of

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concentrating on making more innovative and cheaper products. It is not too late for the United States, but the clock is ticking. We have already begun to look like Italy. If we don’t do something to stop that soon, we will end up like Greece. Luigi Zingales is a professor at the University of Chicago Booth School of Business and a contributing editor to City Journal. His book, “A Capitalism for the People: Recapturing the Lost Genius of American Prosperity,” is published by Basic Books. Published June 6, 2012 - The Wall Street Journal

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THREE EASY WAYS TO END CRONYISM by Peter Schweizer

Both

political parties are talking about cronyism and insider dealing. But it’s only talk, because they are unwilling to take the steps necessary to clean up their own houses. Begin with the Obama administration. Its leaders are quick to embrace the rhetoric of attacking Wall Street, the wealthy, and their insider deals. But they refuse to acknowledge that with taxpayer dollars, they gave stimulus money to projects funded by some of their biggest donors. Look, for example, at the great reporting done by CBS News on the subject of 12 clean energy projects and who is connected with them. In the famous case of Solyndra, newly released emails reveal what the feeding trough looks like. In July 2009, George Kaiser bragged about how he was able to meet with “all the key players in the West Wing of the White House,” and the “almost unique advantage” he enjoyed in getting access to taxpayer money. As he put it in a speech at the Oklahoma Rotary Club, “There’s never been more money shoved out of the government’s door in world history, and probably never will be again, than in the last few months and in the next 18 months. And our selfish, parochial goal is to get as much of it for Tulsa and Oklahoma as we possibly can.” 75  

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The administration, of course, denies everything and doesn’t want to talk about this. And Obama allies deny that anything was wrong with this. They would all rather talk about Romney. Indeed, the watchdog press has not functioned as a watchdog at all. Over at Time magazine, Michael Grunwald declares that the stimulus has been “a wellmanaged thing” and explains that there have been few documented cases of criminal prosecutions for fraud. This, he says, is evidence that there were no “sweetheart deals.” But of course, cronyism is not illegal. The absence of fraud prosecutions says nothing about loans and grants going to friends because that sort of behavior is not fraud. One can only wonder: will Grunwald take such trusting positive attitude toward taxpayer loans and grants being steered to campaign supporters if we have a Romney administration? The other side of the partisan divide is guilty of the same sort of inconsistencies. Mitt Romney has been slamming the Obama administration on these issues, running ads and giving speeches on the dangers of cronyism and crony capitalism. Good for him in raising the issue. But how committed is candidate Romney to going past the talk? After he spoke about the issue, he couldn’t name a single ethics reform that he would initiate to deal with the problem. Huh? With cynicism rampant, most informed voters are going to look past the posturing and look for individuals who actually are willing to embrace transparency and reject cronyism. Of course cronyism thrives when it comes to a lack of transparency. Romney still refuses to reveal the names of his campaign bundlers. He’s released the names of his bundlers that are registered lobbyists (he’s required to do 76  

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so by law), but not everyone else. The fact that the big winners of the Obama administration’s largesse were campaign bundlers seems lost on the Romney campaign. And Governor Romney won’t admit that maybe it was wrong for him as governor to practice cronyism by steering (albeit much smaller) Massachusetts state loans to favored companies. After all, the Romney campaign would rather talk about Obama’s cronyism than discuss any of this. Right now cronyism is an “issue.” Recognizing that people are fed up and have a total lack of faith in their governing institutions, candidates are trying to use cronyism as a cudgel against their opponents. No doubt these issues test well with focus groups. But with cynicism rampant, most informed voters are going to look past the words and posturing and look for individuals who actually are willing to institute and embrace transparency and reject cronyism. How about committing to these basic reforms for starters: 1. No government loans or grants to firms or entities connected to campaign bundlers and large financial supporters. 2. Complete transparency when it comes to campaign financiers and bundlers. 3. No campaign fundraising from large government contractors. Easy, clean, and simple. It’s a good place to start. I think the candidate who comes clean, embraces transparency, and admits to past acts of cronyism, will turn this from an “issue” into a “truth” that we can actually tackle and deal with. Everyone in Washington professes to hate cronyism. Yet when they engage in it they call it “donor relations.” 77  

Toward a New Agenda for America Peter Schweizer is the president of the Government Accountability Institute and the William J. Casey Fellow at the Hoover Institution at Stanford University. In 2008-09 he served as a consultant to the White House Office of Presidential Speechwriting and he is a former consultant to NBC News. His new book is “Throw Them All Out.” Published Aug. 1, 2012 - The Daily Beast

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PAUL RYAN’S FAIRY-TALE BUDGET PLAN by David A. Stockman

Paul

D. Ryan is the most articulate and intellectually imposing Republican of the moment, but that doesn’t alter the fact that this earnest congressman from Wisconsin is preaching the same empty conservative sermon. Thirty years of Republican apostasy – a once grand party’s embrace of the welfare state, the warfare state and the Wall Street-coddling bailout state – have crippled the engines of capitalism and buried us in debt. Mr. Ryan’s sonorous campaign rhetoric about shrinking Big Government and giving tax cuts to “job creators” (read: the top 2 percent) will do nothing to reverse the nation’s economic decline and arrest its fiscal collapse. Mr. Ryan professes to be a defense hawk, though the true conservatives of modern times – Calvin Coolidge, Herbert C. Hoover, Robert A. Taft, Dwight D. Eisenhower, even Gerald R. Ford – would have had no use for the neoconconservative imperialism that the G.O.P. cobbled from policy salons run by Irving Kristol’s ex-Trotskyites three decades ago. These doctrines now saddle our bankrupt nation with a roughly $775 billion “defense” budget in a world where we have no advanced industrial state enemies and have been fired (appropriately) as the global policeman.

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Indeed, adjusted for inflation, today’s national security budget is nearly double Eisenhower’s when he left office in 1961 (about $400 billion in today’s dollars) – a level Ike deemed sufficient to contain the very real Soviet nuclear threat in the era just after Sputnik. By contrast, the Romney-Ryan version of shrinking Big Government is to increase our already outlandish warfare-state budget and risk even more spending by saber-rattling at a benighted but irrelevant Iran. Similarly, there can be no hope of a return to vibrant capitalism unless there is a sweeping housecleaning at the Federal Reserve and a thorough renunciation of its interest-rate fixing, bond buying and recurring bailouts of Wall Street speculators. The Greenspan-Bernanke campaigns to repress interest rates have crushed savers, mocked thrift and fueled enormous overconsumption and trade deficits. The greatest regulatory problem – far more urgent that the environmental marginalia Mitt Romney has fumed about – is that the giant Wall Street banks remain dangerous quasi-wards of the state and are inexorably prone to speculative abuse of taxpayer-insured deposits and the Fed’s cheap money. Forget about “too big to fail.” These banks are too big to exist – too big to manage internally and to regulate externally. They need to be broken up by regulatory decree. Instead, the Romney-Ryan ticket attacks the pointless Dodd-Frank regulatory overhaul, when what’s needed is a restoration of Glass-Steagall, the Depressionera legislation that separated commercial and investment banking. Mr. Ryan showed his conservative mettle in 2008 when he folded like a lawn chair on the auto bailout and the Wall 80  

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Street bailout. But the greater hypocrisy is his phony “plan” to solve the entitlements mess by deferring changes to social insurance by at least a decade. A true agenda to reform the welfare state would require a sweeping, income-based eligibility test, which would reduce or eliminate social insurance benefits for millions of affluent retirees. Without it, there is no math that can avoid giant tax increases or vast new borrowing. Yet the supposedly courageous Ryan plan would not cut one dime over the next decade from the $1.3 trillion-per-year cost of Social Security and Medicare. Instead, it shreds the measly means-tested safety net for the vulnerable: the roughly $100 billion per year for food stamps and cash assistance for needy families and the $300 billion budget for Medicaid, the health insurance program for the poor and disabled. Shifting more Medicaid costs to the states will be mere make-believe if federal financing is drastically cut. Likewise, hacking away at the roughly $400 billion domestic discretionary budget (what’s left of the federal budget after defense, Social Security, health and safety-net spending and interest on the national debt) will yield only a rounding error’s worth of savings after popular programs (which Republicans heartily favor) like cancer research, national parks, veterans’ benefits, farm aid, highway subsidies, education grants and small-business loans are accommodated. Like his new boss, Mr. Ryan has no serious plan to create jobs. America has some of the highest labor costs in the world, and saddles workers and businesses with $1 trillion per year in job-destroying payroll taxes. We need a national sales tax – a consumption tax, like the dreaded but 81  

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efficient value-added tax – but Mr. Romney and Mr. Ryan don’t have the gumption to support it. The Ryan Plan boils down to a fetish for cutting the top marginal income-tax rate for “job creators” – i.e. the superwealthy – to 25 percent and paying for it with an asyet-undisclosed plan to broaden the tax base. Of the $1 trillion in so-called tax expenditures that the plan would attack, the vast majority would come from slashing popular tax breaks for employer-provided health insurance, mortgage interest, 401(k) accounts, state and local taxes, charitable giving and the like, not to mention low rates on capital gains and dividends. The crony capitalists of K Street already own more than enough Republican votes to stop that train before it leaves the station. In short, Mr. Ryan’s plan is devoid of credible math or hard policy choices. And it couldn’t pass even if Republicans were to take the presidency and both houses of Congress. Mr. Romney and Mr. Ryan have no plan to take on Wall Street, the Fed, the military-industrial complex, social insurance or the nation’s fiscal calamity and no plan to revive capitalist prosperity – just empty sermons. David A. Stockman was the director of the Office of Management and Budget from 1981 to 1985, and is the author of the forthcoming book “The Great Deformation: How Crony Capitalism Corrupts Free Markets and Democracy.” Published Aug. 13, 2012 - The New York Times

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Section Three

ENERGY SECURITY BLANKET How to Outgrow Right and Left Addiction to the Past

   

 

THE SUPPLY AND DEMAND OF

RENEWABLE ENERGY by Dennis V. McGinn

Primary reliance on coal, oil and natural gas has brought remarkable prosperity to much of the world in their mere 150 year reign. We should begin all conversations regarding our need to diversify that fuel portfolio from this platform of recognition and gratitude. For a whole host of reasons that range from human health effects from polluted air caused by burning fossil fuels, to the contribution to the greenhouse effect, to the increased expense of extraction to the fact that fossil fuels are ultimately finite -- we know that now, more than ever, that we must forge a stronger, more diverse, and less polluting global energy economy. That economy must rely on vastly expanded efficiency strategies, and on renewable sources of energy, as well. Jeremy Rifkin has long been a visionary in forging a more resilient and sustainable world, and his latest work, entitled The Third Industrial Revolution is Rifkin's latest contribution to helping us all first envision the future we wish to reach, and then marshal the resources necessary to actually achieve that vision. Rifkin's five-pillar infrastructure begins with renewable energies -- a topic near and dear to my heart as the President of the American Council On Renewable Energy (ACORE), a non-profit dedicated to the scale-up of renewable energy. Rifkin points out that only by beginning 85  

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with renewable energy as Pillar One will we succeed in creating a post-carbon renewable energy society. Renewable energy is not, of course, a revolutionary new idea. Photovoltaics, for example, date back to the 19th century. The concept of relying on energy sources that are not only regenerative, but that have a fuel cost of absolutely zero has got to have strong appeal. Renewable energy development is, in fact, a key ingredient to economic growth, job creation, deficit reduction and enhanced national security. The good news is that after many “false starts,” renewable energy technologies are beginning to take hold. As those technologies scale up, their costs decline. Renewable energy is currently responsible for 11 percent of America's domestic energy production, with over 125 GW of operating renewable power projects (56.8 GW from non-hydro technologies) and 13 billion gallons of biofuels projects. The biofuels industry alone displaces the need for roughly 445 million barrels of oil, more than the total estimated crude oil imports from Saudi Arabia last year. Today, solar energy is the fastest growing energy technology in the U.S. The U.S. solar market grew to a $6 billion industry in 2010, up 67 percent from $3.6 billion in 2009. The U.S. wind industry had over 40,000 MW of wind power capacity installed by the end of 2010, with over 5,000 of those megawatts installed in 2010 alone. This is enough to power over 10 million American homes. The laws of supply and demand are in force as our energy economy necessarily changes, and technology costs of renewables have declined significantly over the past 10 years. Solar is already competitive with other sources of energy in some areas like Nevada and Hawaii. And, of course, those costs would be even more competitive if the 86  

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full external costs of all energy use were internalized into the prices we pay. Renewable technologies are improving to become more efficient, as well as cost-effective. There is no reason that this trend cannot continue. The current U.S. energy posture constitutes a serious and urgent threat to our national and economic security. That challenge also represents a great opportunity. The Department of Defense, not coincidentally, is helping to lead the charge through deployment of distributed renewable technologies that are aiding and abetting our troops in Afghanistan and elsewhere. Solar panels at one field station in Afghanistan continued to provide reliable power even after they had been shot up by enemy fire. Soldiers did not even realize the panels had been hit until they examined the panels closely days later. We are fighting the advantage of incumbency by fuels that have strong economic backing, but are, in fact finite. If we seize this moment, and begin to view wind farms, solar arrays and other renewables springing forward as the victory gardens of the 21st century, we can forge a strong post-carbon energy economy that will serve both people and the planet well. I add my thanks to Jeremy Rifkin for his vision and his work -- and look forward to collaborating with him to help realize the five pillars outlined in The Third Industrial Revolution. Vice Admiral Dennis McGinn is the President and CEO of the American Council On Renewable Energy (ACORE). More information about ACORE can be accessed at www.acore.org. Published Sep. 26, 2011 - The Huffington Post

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EFFICIENCY AND CONSERVATION NOT ENOUGH TO ACHIEVE ENERGY SECURITY by David Kerner and Scott Thomas

The

Defense Department currently deals with changing energy circumstances by reducing demand through efficiency and conservation, and by attempting to improve supplies. While this approach may optimize the use of those resources, it overlooks the many other energy-related challenges that the military must cope with and still accomplish the mission. The current strategy leaves the U.S. military highly vulnerable to supply challenges that are beyond its control. The fault lies, perhaps, in the department’s definition of energy security: “Having assured access to reliable supplies of energy and the ability to protect and deliver sufficient energy to meet operational needs.” For war fighting, the Defense Department pursues this through a small set of operational energy goals: Ensuring the availability of resources, pursuing efficiency measures and implementing conservation programs. But while these key elements provide the operational energy strategy with critical pillars, they are insufficient, simply because the government cannot always guarantee access to reliable supplies of energy. 89

 

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The current goals neglect to address how the mission still gets accomplished without enough energy resources. And the same concern applies to defense installations. To ensure mission sustainability, the military must understand the full range of potential vulnerabilities to energy shortages and disruptions and prepare to handle circumstances where supplies are not assured. So while the current energy security goals are important, true energy security must include understanding and addressing all vulnerabilities. To ensure mission sustainability when supplies are not assured, the Defense Department should incorporate an additional pillar into its operational energy security strategy – that of energy resilience. Resilience can be defined as being able to perform the intended mission despite energy supply perturbations. This definition refocuses policy from assuring supply to assuring preparedness, thus setting the framework for planners and operators to improvise, adapt and overcome the effects of potential supply interruptions. The U.S. military understands resilience. Small unit leaders regularly demonstrate extraordinary initiative and imaginative problem solving. The Defense Department generally excels at organizing around a problem and orienting the combined capabilities of military research, industry, national laboratories, academia and other organizations toward solving complex problems. It will need to capitalize on these strengths as it contends with challenges to energy security. Engineers and business leaders think of resilience as the amount of disturbance a system can resist or the speed with which it returns to equilibrium. Natural resource managers observe that ecosystems adapt, survive, and 90  

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thrive despite a wide range of stresses and disruptions. In this context, resilience is measured by the amount of disturbance a system can absorb without changing its structure, function and overall identity. This last definition comes closest to describing what is necessary for energy security. How much disturbance can the national security infrastructure and operating forces accommodate while still maintaining their basic structure, mission capabilities, and capacity to function? How far can they bend and adapt without breaking? Defense installations and operations are highly dependent upon reliable delivery of large quantities of specific, high-quality energy resources. This dependency creates significant vulnerability, because of a highly uncertain outlook for resource availability, finite oil supplies and increasing demand by the developing world. Operating forces are tethered to vulnerable supply lines, the defense of which skews the “tooth to tail” ratio and places additional service members in harm’s way. Installations that rely on aging, maxed-out commercial electric infrastructure are fraught with many physical weak points. Continuing to assume that adequate energy supplies will be available, either through technological innovation or discovery of new sources, is unrealistic. The military has optimized its mobility and weapons to rely on the most efficient mode of energy delivery currently available: oil. While this strategy may make sense at the enterprise scale, it does not at a larger scale, such as during extreme events like wars, insurrections, drought and famine, energy embargoes and shortages, financial collapse and technological transformations. 91  

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When low-frequency, high-consequence “Black Swans” occur, they can upset the carefully optimized system. Global energy competition is rendering resources ever tighter, leaving defense missions increasingly vulnerable to even small supply perturbations. The Pentagon’s response to energy shortages and increasing costs has been to pursue a variety of sustainability initiatives, including efficiency and conservation measures and alternative resources. Efficiency and conservation measures help harvest the low-hanging fruit, but while they are necessary and build resilience, these measures are not enough. Efficiency myopia may drive performance, profit, or savings over the short term, but eventually the low-probability, highconsequence events – critical material shortages or attacks on the electric grid – will threaten stability. For example, continuing to rely upon the least costly energy sources without systematically exploring and preparing to use alternatives would leave a military installation with few choices when the supply gradually or suddenly runs out. The current efficiency and conservation-based strategy is a necessary and promising start, but the Defense Department needs to expand its tool kit. It needs a management approach that focuses on exploring and preserving options, seeking diversity in energy uses, types, and sources, and monitoring energy supply and demand parameters at multiple scales. Since resilience has not been a focus for energy security, it is not surprising that it is not directly addressed in the Operational Energy Strategy, which provides a roadmap for incorporating energy considerations into current programs, processes and institutions. 92  

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Critical to achieving energy resilience is the ability to quantify and control. Energy managers and planners have sought metrics for assessing energy security, and specifically, resilience. • Response diversity: The variety of different energy sources, operational options, and system characteristics that support mission flexibility. • Critical dependencies: The reliance upon consumable materiel, manpower (with specific skill sets), simultaneous or sequential dependent functions and operations, communications, controls (centralized and dispersed), and all other aspects of the doctrine, organization, training, materiel, leadership, personnel, and facilities spectrum. • Redundancy: The ready availability of backup systems, components, and controls. • Substitutability: How readily different fuel types, power sources, or functional capabilities can be engaged to achieve the mission or task. • Modularity/standardization: How readily system components can be swapped out without modifications. • Interconnection options: The variety of ways capabilities or functions can be combined or linked to achieve the mission or task. • Dispersion: The degree to which energy supplies are geographically close to the systems and functions they support. • Simplicity: The degree to which energy use throughout a system is readily understood. • Stability: The degree to which an installation or operation can continue to function if energy inputs, controls, or conditions are disrupted. 93  

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• False/skewing subsidies: Whether components of a system (inputs, outputs or features) receive incentives that are disproportionate or unrelated to their actual value. • Situational awareness: How well a system, including components and functional capabilities, is monitored. • Preparedness: The existence of plans and procedures for responding to energy perturbations. • Readiness: How quickly an installation or operation can respond to changing energy conditions without delays due to technical, administrative or command commitments. • Autonomy/control over destiny: The degree to which an organization (or operation or specific function) can selfselect alternate actions, configurations, and components to achieve the specific mission or function. This list is not exhaustive. The importance of the factors will vary according to each situation, and it is important to understand how changes that enhance resilience in some areas may reduce it in others. Tradeoffs will likely be necessary. Installation commanders may focus on building energy resilience by increasing redundant sources of energy for mission critical applications and exercising how to deal energy interruptions within their emergency response plan. Unit commanders may focus efforts to build resilience by conducting drills to test for single points of failure and critical dependences, and assess the ability to substitute power types in key systems, by testing regular and extended use of multiple fuels. Program managers may assess energy policies with an eye toward realigning or 94  

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eliminating incentives that provide funding support but work against resilience goals. One of the objectives in the Defense Department’s Operational Energy Strategy is building energy security into the future force. It calls for incorporating energy security into requirements and analysis, and for the development of an energy performance metric that can be inserted into analytical tools. Energy resilience metrics should be part of the overall performance metric, as well as considered in requirements development and acquisition processes. This shift in emphasis from assuring supplies to assuring mission preparedness will complement and reinforce the mandate that mission performance take priority over energy consumption. It will also ensure future planning addresses not just energy supplies, but actual mission performance for the widest range of circumstances. The strategy also recommends adapting policy, doctrine, professional military education and combatant command activities to meet energy strategy goals. Resilience concepts and strategies also should be included. Presidential Executive Order 13514 requires installations to develop installation sustainability performance plans for improving energy efficiency. The energy resilience metrics provide a useful tool for evaluating vulnerabilities, analyzing alternatives and developing balanced solutions. The Defense Department has a choice: Continue to exclusively chase efficiency and conservation, or direct resources toward building resilience. Considering the current intense focus on efficiency and conservation – and the progress that is being made – a prudent course of action might be to do both.

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To get from here to there, the department must be able to measure, monitor and manage the transformation. It is perhaps ironic that the Defense Department’s capacity for optimizing power projection to fit select energy resources may now work against it, rendering the military vulnerable in the face of an unpredictable, complex and insecure energy outlook. Now the department must transition to an energy strategy that incorporates resilience and adaptability to evolving conditions. In light of planned budget constraints, shifting mission priorities, defense requirements for flexibility and a changing global energy scenario, resiliency measures offer a sound basis for building mission sustainability. By not pursuing resilience, the Pentagon risks backing itself further into an efficiency corner. David Kerner is science, technology and energy policy advisor, and senior Engineer at The Tauri Group, Alexandria, Virginia. Scott Thomas is a senior scientist with Stetson Engineers in San Rafael, California, and an assistant research professor with the Desert Research Institute in Reno, Nev. Published June, 2012 - National Defense Magazine www.nationaldefensemagazine.org

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TO DRIVE OR NOT TO DRIVE, THAT IS THE QUESTION JUNE 21 IS DUMP THE PUMP DAY 2012 by Michael Marx

In Washington, D.C., too many leaders haven’t gotten the word that our nation’s love affair with oil is on the rocks. But across the nation, Americans who have access to public transportation aren’t waiting -- they’re making the break from oil and voting with their feet by “dumping the pump” in favor of solutions like public transit. On June 21, the American Public Transportation Association (APTA) and the Sierra Club are proud to once again cosponsor the seventh annual National Dump the Pump Day, an opportunity for millions of Americans across the country to celebrate smart public transportation choices. Public transportation ridership is surging nationwide -whether it’s bus, light-rail or train, Americans are using transit. Not just in big cities but all over America, transit use was up by five percent in the first quarter of 2012 -that’s 125.7 million more trips than in 2011. Public transit ridership is on the upswing for several reasons. The most obvious is financial: A family that downsizes by one car and switches to public transit can save nearly $10,000 a year. The cost of driving has become significant enough that more Americans are asking themselves each time they leave the house whether they 97  

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should grab the car keys or opt for a more cost-effective way to get where they need to go. But while volatile gas prices may have inspired more people to try transit, what’s convincing them to stick with transit is its convenience. When you can leave the driving to someone else, it frees up valuable time for reading, working, surfing the web, or safely making a phone call. What’s more, technology is creating a higher-quality product and service. Technologies like smartphones and Google Maps make it easy to plan transit trips even in unfamiliar areas. Buses powered by cleaner fuels, real-time information on bus and train arrivals, and the availability of Wi-Fi on vehicles have all transformed the transit rider’s experience. Public transportation saves money and adds convenience for individuals, but its collective benefits for our society are equally compelling. According to the latest Texas Transportation Institute congestion report, Americans saved $19 billion in congestion costs alone because of public transit. And public transit doesn’t just get Americans to work -- it puts Americans to work. The public transit industry employs more than 400,000 people. Every dollar invested in public transportation generates approximately four dollars in economic returns. These returns aren’t Wall Street dividends or oil company profits. They show up as salaries that pay mortgages, put kids through college, and take families on vacation. And as if the economic boost weren’t a good enough reason to invest in public transit, consider that the 4.2 billion gallons of gas saved last year by transit users also slashed U.S. carbon emissions by 37 million metric tons. Last spring the media worked themselves into a panic over rising gas prices. Each of us, whether we drive or not, 98  

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shares concerns about the volatility of gas prices. Although millions of car-dependent Americans are directly affected, the economic instability that comes with high gas prices spares no one -- the recovery grinds to a halt, job creation slows down, and the price of just about everything else goes up, too. How do we end this tyranny of the gas pump? The majority of Americans know that no amount of drilling, blasting, deep-sea diving, or strip-mining to get to more oil can ever make any significant difference in the price of gas. The only solution to high gas prices is for Americans to find ways to use less gas. By far the easiest and most effective of these is to switch from driving to riding. Public transit saves money and puts America back to work. Public transit slashes our oil use and cuts our carbon emission, smog, and other air pollution. Public transit is a solution to volatile gas prices that’s already working for millions of Americans. It’s time for everyone to get on board and give all Americans the ability to “dump the pump.” Michael Marx has helped lead several campaigns to improve the environmental practices of major corporations like Mitsubishi, Home Depot, and Walmart. He also coordinated the International Tar Sands Oil Campaign involving over 100 groups working in the U.S., Europe and Canada. He is now the Director of the Sierra Club’s Beyond Oil Campaign, which seeks to accelerate the United States transition to a clean and sustainable transportation future. Published June 12, 2012 - The Huffington Post

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Section Four

DIGITAL FREEDOM How the Right and Left Can Use Technology to Advance Freedom and Sustainability

   

 

A DECLARATION OF THE INDEPENDENCE OF CYBERSPACE by John Perry Barlow Davos, Switzerland, February 8, 1996

Governments of the Industrial World, you weary giants of flesh and steel, I come from Cyberspace, the new home of Mind. On behalf of the future, I ask you of the past to leave us alone. You are not welcome among us. You have no sovereignty where we gather. We have no elected government, nor are we likely to have one, so I address you with no greater authority than that with which liberty itself always speaks. I declare the global social space we are building to be naturally independent of the tyrannies you seek to impose on us. You have no moral right to rule us nor do you possess any methods of enforcement we have true reason to fear. Governments derive their just powers from the consent of the governed. You have neither solicited nor received ours. We did not invite you. You do not know us, nor do you know our world. Cyberspace does not lie within your borders. Do not think that you can build it, as though it were a public construction project. You cannot. It is an act of nature and it grows itself through our collective actions. You have not engaged in our great and gathering conversation, nor did you create the wealth of our marketplaces. You do not know our culture, our ethics, or

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the unwritten codes that already provide our society more order than could be obtained by any of your impositions. You claim there are problems among us that you need to solve. You use this claim as an excuse to invade our precincts. Many of these problems don’t exist. Where there are real conflicts, where there are wrongs, we will identify them and address them by our means. We are forming our own Social Contract . This governance will arise according to the conditions of our world, not yours. Our world is different. Cyberspace consists of transactions, relationships, and thought itself, arrayed like a standing wave in the web of our communications. Ours is a world that is both everywhere and nowhere, but it is not where bodies live. We are creating a world that all may enter without privilege or prejudice accorded by race, economic power, military force, or station of birth. We are creating a world where anyone, anywhere may express his or her beliefs, no matter how singular, without fear of being coerced into silence or conformity. Your legal concepts of property, expression, identity, movement, and context do not apply to us. They are all based on matter, and there is no matter here. Our identities have no bodies, so, unlike you, we cannot obtain order by physical coercion. We believe that from ethics, enlightened self-interest, and the commonweal, our governance will emerge . Our identities may be distributed across many of your jurisdictions. The only law that all our constituent cultures would generally recognize is the Golden Rule. We hope we will be able to build our particular solutions on that basis. But we cannot accept the solutions you are attempting to impose. 104  

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In the United States, you have today created a law, the Telecommunications Reform Act, which repudiates your own Constitution and insults the dreams of Jefferson, Washington, Mill, Madison, DeToqueville, and Brandeis. These dreams must now be born anew in us. You are terrified of your own children, since they are natives in a world where you will always be immigrants. Because you fear them, you entrust your bureaucracies with the parental responsibilities you are too cowardly to confront yourselves. In our world, all the sentiments and expressions of humanity, from the debasing to the angelic, are parts of a seamless whole, the global conversation of bits. We cannot separate the air that chokes from the air upon which wings beat. In China, Germany, France, Russia, Singapore, Italy and the United States, you are trying to ward off the virus of liberty by erecting guard posts at the frontiers of Cyberspace. These may keep out the contagion for a small time, but they will not work in a world that will soon be blanketed in bit-bearing media. Your increasingly obsolete information industries would perpetuate themselves by proposing laws, in America and elsewhere, that claim to own speech itself throughout the world. These laws would declare ideas to be another industrial product, no more noble than pig iron. In our world, whatever the human mind may create can be reproduced and distributed infinitely at no cost. The global conveyance of thought no longer requires your factories to accomplish. These increasingly hostile and colonial measures place us in the same position as those previous lovers of freedom and self-determination who had to reject the authorities of distant, uninformed powers. We must declare our virtual 105  

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selves immune to your sovereignty, even as we continue to consent to your rule over our bodies. We will spread ourselves across the Planet so that no one can arrest our thoughts. We will create a civilization of the Mind in Cyberspace. May it be more humane and fair than the world your governments have made before. John Perry Barlow is a retired Wyoming cattle rancher, a former lyricist for the Grateful Dead, and co-founder of the Electronic Frontier Foundation. Since May of 1998, he has been a Fellow at Harvard Law School’s Berkman Center for Internet and Society.

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TELEWORK An Opportunity to Dramatically Improve the Nature of Work, as Well as Reduce the U.S. Trade Deficit, Congestion and the Production of CO2 by Joan Blades

The Custom-Fit Workplace is about how everyone needs work that fits their life. Employers that honor this core value and create work that respects their worker’s responsibilities outside of work as well as at work are rewarded by more productive, resilient and profitable businesses. Bottom line- Well designed work structure is good for employers and employees. Win/win change is hard to object to.- Right now a majority of employers and managers are accustomed to traditional command and control authoritarian work structures. This is what they were raised on and this is how they are comfortable managing employees. At the core of custom-fit work is trusting and empowering employees, treating them like adults. The vast majority of working adults are responsible human beings -parents, trusted members of their communities... Yet they get to work and too often they are not trusted to manage their own time. Great managers collaborate to set clear agreed upon goals and trust their reports to get the job done or let them know what more they need to succeed. For the small percentage of reports that can not meet that expectation it is soon clear that the job does not fit. Workplaces with this

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type of management are hugely productive, respectful and give everyone their dignity. Telework or virtual work along with flexibility, is near the top of the menu of opportunities to make jobs better fit the workforce. For many employers telework is a way to improve productivity or save on real estate costs. We are putting an emphasis on telework because this particular work culture change is happening spontaneously as well as intentionally. Someone gets sick or needs to care for a parent and works from home. The practice spreads. One spouse has to change jobs and the other spouse has to leave their job or work remotely. Remote work proves to be a success and more remote workers are hired. ATT NJ decides to close their offices and enable employees to telework. Might we be at a tipping point that could be the beginning of a shift to a whole set of beneficial work culture changes? Companies like Sun that embraced virtual work practices, Apple and Cisco which sell hundreds of millions of dollars of products that enable virtual work and Nontechnology businesses that are benefiting from these smarter work practices have important stories to tell. We need big and small companies to take leadership roles speaking about and sharing best practices. We need academic leadership to both speak about the opportunity and make sure that business management classes are updated to ready future managers to employ these practices. We need HR professionals and management consultants at the ready to ensure that workplaces that choose to take this leap forward succeed. We need cultural figures, artists, speakers and others helping us reshape our vision of what 108  

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work should look like. And we need government to continue to encourage telework for the benefit of their own workers and for communities they serve. Though there are an abundance of examples of work practices that benefit both employer and employee, along with an abundance of research and studies confirming the value of - flexibility, telework, non-linear career paths and high commitment work practices, by and large sorely needed changes do not happen on a large scale despite decades of knowledge about better ways to structure work. Telework is an opportunity to make significant headway changing work cultures as well as reducing greenhouse gasses. There is a strong argument that telework is an attainable efficiency opportunity available to the business community immediately. The tools for doing telework are well tested and widely used. According to a variety of studies 40% to 60% of the work force could telework one day or more per week. Why Now is the Time to Step Up

Technology is changing the way we work. Times of change create opportunities, if we can shape that change. • Telework is demonstrably great for the business bottom line. • Telework done right is great for workers. • Government, local and national, has recognized telework as an opportunity to reduce congestion, increase productivity and resiliency, reduce our dependence on foreign oil, improve the environment and respond to the needs of a modern work force. Atlanta has done a great job promoting telework. If we could make their process easy for any city to replicate and promote it we could have a huge impact. 109  

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A Telework Research Network white paper suggests that 40% of U.S. workers are in roles that could be managed part-time or more through telework, and that 79% of those workers would accept this opportunity if it were offered. Given these numbers, the authors then project the benefits to the economy and environment if all of these workers with telework-compatible jobs were enabled to work at home half time: 1. U.S. businesses would save $436 billion dollars a year. 2. 43 Million Metric Tons of greenhouse gasses would be cut. 3. 288 million fewer barrels of oil a year would be used, reducing our foreign trade deficit. Technology is changing the way we work even though most organizations don’t make change until there is severe discomfort or a crisis. Let’s take advantage of this time of transition and shape it for success. Thus far work practice changes have been a mixed blessing. 24/7 connectivity needs to be used to improve our productivity, resiliency and freedom not oppress workers with 24/7 work weeks. We can craft the change that is happening toward the benefits of telework for employers, employees and the environment while minimizing the down sides. Joan Blades is co-founder of MoveOn.org and MomsRising.org, and co-author of “The Custom-Fit Workplace.” “Telework” published Aug. 5, 2011 - The Huffington Post

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EUROPE’S ACTA FREAK OUT: HOW HOLLYWOOD HOLDS BACK THE TRADE AGENDA by Harold Feld

For

years, Hollywood has used the negotiation of international trade agreements to push for heavy regulation of the Internet in the name of “fighting online piracy.” As a general rule, the United States Trade Representative (USTR) and the non-Hollywood industry trade associations (with the notable exception of the tech industry) involved in the negotiation of these trade agreements let Hollywood have its way. (The public, needless to say, are generally not consulted at all.) So it was with the Anti-Counterfeiting Trade Agreement. Although negotiations began in 2006, Hollywood’s insistent demands for a “censorship firewall to fight piracy” held up negotiations for years. Last summer, with ACTA negotiations stalled for two years because of Hollywood insistence adding all kinds of regulate-theinternet crazy stuff, I and my employer Public Knowledge gave the USTR and the industries pushing for ACTA some friendly advice: “Drop the crazy stuff.” And indeed, only when Hollywood dropped its most ridiculous demands did the U.S. finally get the ACTA Treaty signed in October 2011. But Hollywood still got plenty of crazy stuff into ACTA. The furor over Hollywood’s failed effort to get its “firewall of censorship” through the Stop Online Piracy Act (SOPA) 111  

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woke up the people of Europe to the crazy stuff in ACTA. As a result, we have seen massive protests throughout Europe and many European Union members (and the EU itself) backing away from ACTA. This should raise a rather important question for the U.S. negotiators and the trade associations that have, until now, allowed Hollywood to drive the crazy train on these negotiations: what good is spending years negotiating a trade agreement no one wants to sign? Officially, the U.S. government wanted ACTA to stop people from bringing actual counterfeit goods into the country, or marketing actual counterfeit goods abroad. That’s why a lot of industry groups and companies wanted ACTA. Not because of they wanted to regulate the Internet and prop up the traditional business models of the movie and music industries, but to deal with the folks making warehouses full of fake Louis Vuitton bags and knock-off Omega watches. But with the backlash against the Hollywood crazy train, the agreement has become a train wreck. So we won’t have countries working with us on the actual problem ACTA was supposed to address -- mass production of counterfeit real goods -- because Hollywood made this all about making sure no one streams Mars Needs Moms before the DVD release. Unfortunately for those supporting the “free trade” agenda, ACTA is not unique. Whenever there is an international trade agreement negotiation, Hollywood jumps in, takes over, and starts driving the crazy train off a cliff by demanding all kinds of nonsense in the name of “stopping piracy.” This invariably holds things up (as noted above, ACTA got held up two years) because the rest of the world does not like the crazy stuff that Hollywood keeps selling. Nevertheless, the official position of the U.S. government has generally been to let 112  

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Hollywood drive the crazy train through Trade Agreement Town. This makes everyone else in Trade Agreement Town captive to Hollywood’s crazy demands. I and others occasionally tried to tell the USTR and the other industry groups involved in international trade agreement negotiation: “Guys, you are not actually doing anyone a favor by letting Hollywood drive the crazy train off a cliff. If you want a real trade agreement that deals with actual trade stuff, you need to stop letting Hollywood hijack your trade negotiations and tell them to stick to stuff the rest of the world will accept.” But then the MPAA and RIAA come along and say: “Ignore those whacky Public Knowledge hippies! They are just anti-globalization free trade haters who love piracy and hate capitalism and freedom. Do not even listen to their lies!” Sadly, this has pretty much cuts off any intelligent conversation, as apparently all trade associations involved in international trade negotiations swore some kind of Pinky Oath to never ever question what Hollywood tells them. But here’s the problem: Trade agreements are not terribly useful if other countries don’t sign them. I can write up the “Harold Feld Trade Agreement” that says I am entitled to duty free liquor whenever I travel, but if no one signs it I’m still gonna pay VAT when I do the Whisky Trail in Scotland. So when USTR and the other trade associations involved in negotiating ACTA let Hollywood drive the crazy train, and the rest of the world decides they don’t like the crazy stuff, you don’t have a trade agreement; you have a train wreck. So let me give USTR and the non-Hollywood industries involved right now in negotiating trade agreements like the Trans-Pacific Partnership Agreement (TPPA) another spot of free advice. (I won’t even try to suggest this to Hollywood, given they are still in denial there was ever anything wrong with SOPA.) Do not let Hollywood hijack 113  

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your trade negotiations to put in even crazier stuff no one in the world likes, wants, or will sign on to. I know, Hollywood has already been pushing for plenty of crazy stuff and doing crazy things like saying Canada’s not moral enough to join you all on the Group W Bench at the TPPA negotiations. But it is never too late to take them aside and talk some sense into them. You can point out that we now have yet-another-study from academics rather than paid industry flunkies showing that peer-2-peer piracy has little impact on U.S. box office revenue and that Hollywood could do a lot to cut down on international piracy by making content available (for a fee) in a time and manner that customers want rather than insisting on an out-dated, complex “release windows” system developed in the old days when folks either went to theaters or waited ’til it showed up on DVD. So perhaps Hollywood should ratchet back the crazy stuff, or risk getting cut out of the negotiations entirely so every one else can get a trade agreement done? If any of you are interested, we at Public Knowledge have a few suggestions for how to handle intellectual property issues in a non-crazy way. Feel free to browse. And remember, any time you want to get off the Hollywood crazy train and avoid the train wreck, we’re happy to talk. At the very least, the next time someone from Hollywood starts babbling about how you need this or that crazy Internet censorship thing to “fight online piracy,” ask yourself this question: “What is the point of spending years writing a trade agreement that other countries won’t sign?” Harold Feld is a public-interest attorney specializing in telecommunications, Internet, and First Amendment issues. He is currently Legal Director for Public Knowledge and also writes Tales of the Sausage Factory at Wetmachine.com. Published Feb. 17, 2012 - The Huffington Post

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ABOUT FUTURE 500 Future

500 is a non-profit organization that builds alliances between adversarial stakeholders – corporations and activists, conservatives and progressives, Republicans and Democrats – to advance systemic solutions to economic, social, and environmental challenges. Founded in 1995, we have offices in the U.S., China, and Japan, and affiliates in every area where business, civil society groups, and other stakeholders find themselves in conflict. Power for Purpose We embrace the highest purpose of every institution we work with – corporate, non-profit, conservative, libertarian, liberal, progressive, educational, governmental, technological, and charitable. We believe in these aspirations, and seek to advance them. We help institutions focus on their core purpose, and use their power to advance it. We understand that vested interests can slow the process of innovation and adaptation in all institutions, not just business. We respect these interests, and understand that they are legitimate – they reflect people’s lives and livelihoods. We also seek to meet these interests in ways that do not reduce the effectiveness of the institutions in advancing their highest purposes. Stakeholder Engagement Services We provide ten core services in stakeholder engagement. 115  

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1. Inventory stakeholders, categorize them, prioritize them, and map their relationships. 2. Identify strategic stakeholders – funders, media, experts, campaigners, and mainstream groups, among others, who can drive change across many stakeholder categories. 3. Prepare Strategic Plans to reduce risk and conflict, and advance common-ground aims of business and NGO stakeholders. 4. Engage stakeholders, directly and indirectly, to find areas and conflict and common ground. 5. Introduce stakeholders to one another, and where there is potential, highlight mutual interests. 6. Prepare Insight Reports for companies and NGOs, highlighting opportunities for mutual gain. 7. Prepare Tracking Reports for companies and NGOs, showing issues and campaigns that are “just around the corner.” 8. Provide Media and Communications Services, preparing and reviewing public communications, placing speakers at conferences, and developing media outreach plans. 9. Facilitate Stakeholder Meetings, both formal and informal. 10. Provide intensive Briefings, Trainings, and Strategic Planning Sessions for senior executives and leaders. Programs and Issues We focus on four broad issue categories. In each of these, we work with business and stakeholders to identify at least one systemic solution: one that businesses and stakeholders from the right to the left can support, to get to the root cause of a genuine problem.

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The four categories, and our current multi-stakeholder priority in each, are: Programs Energy

Water

Issues

Multi-Stakeholder Priorities

Climate Natural Gas / Fracking Oil Sands Coal Productivity/Efficiency Renewables National Security

Revenue-neutral tax shift

Food & Agriculture Energy Development Human Right to Water

Price water in agriculture and energy

Model performance standards

Supply chain standards for water Materials

Technology

Chemicals Recycling Resource Productivity Materials for Manufacturing Forestry Mining

Price externalities; phase out subsidies

Empowering People Sustainability Innovation Value Creation Human Rights Labor Rights

Innovation Agenda

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Deliverables  Our typical deliverables across these issues and subissues reflect our service areas, and include: • • • • • • • • • • •

Briefings Trainings Stakeholder Inventories Maps Plans Meetings – informal, formal, direct, indirect Conferences – strategy, tactics, relationships Media – tracking, messaging, placement Insight Reports Tracking Reports Progress Reports  Free Market Approach 

We support free markets, and believe that for a market to be free, major externalities need to be internalized. They must have “owners” (as the right might say) or “stewards” (as the left prefers). When externalized costs are owned, conflicts between economic, social, and environmental needs can be more readily resolved. Too often, the benefits of enterprise are privatized, while the costs are socialized. This happens in many ways. Pollution. Damage to air, water, and land. Wars fought to protect access to resources. For free markets to work, those who impose these costs must pay their fair share of them, not for punitive reasons, but for practical ones. Otherwise, in a competitive economy, the costs will build up to society at large, until they threaten the whole system. Costs that are subsidized keep increasing.

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For that reason, Future 500 focuses on policies that assign owners or stewards to externalities. This advances both freedom and responsibility. It gives people and companies the freedom to use resources as they choose, while also making them responsible for the consequences, including the costs. The right and left sometimes disagree on the definition of capitalism and free markets. But most agree with the approach that Future 500 takes. When it comes to their power, they may sometimes violate their principles. But when focusing on their purpose, they tend to agree. They are each: • • • • • • • •

Against Socialized Costs Against Subsidies of Obsolete Technologies Against “Crony Capitalism” Against Concentrated Power For Empowering Individuals For Empowering Local Communities For Energy Productivity/Efficiency For Internalizing Externalities

We look to these areas of agreement, and others, to find common ground.  Profits on Purpose  We use our profits to advance our purposes. This is not because we are a non-profit. This is the ideal for all organizations. Profit is not an end – it is always a means. Except for a rare few who have discovered no purpose for their lives, everyone always uses profit to do something they value more highly. Profit comes in many forms, not just financial. 119  

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We assess each Future 500 project, program, and partnership on the basis of how it advances seven forms of profit, each of which helps advance our purpose. 1. Engagement – which leads stakeholders to discover opportunities to collaborate and innovate 2. Net Revenues – which can be dedicated to initiatives for which there is not yet market demand 3. Relationships – which strengthen us across all our projects and programs 4. Learning Opportunities – which enable us to apply our methods in new areas 5. Emergent Opportunities – which invariably emerge when diverse stakeholders engage 6. Market Power for Program Goals – the brand or buying power of major companies and others 7. Political Power for Program Goals – the policy advocacy power of major companies and others  Purpose-Based Approach: A Preference for Innovation and Change In most institutions, no matter how noble their purpose, power is selfish. Over time, ideals are sacrificed to maintain the status quo. This may help protect institutional power in the short term, but it undermines its purpose in the long term. This is one reason change is hard to start and easy to stop. Vested interests inside every institution have the power to stop change. They often have neither the power nor inclination to promote change. Future 500 helps mobilize power across institutions, to advance the long-term purposes they exist to serve. 120  

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We help corporations create value, labor unions enhance worker prosperity, non-profits protect important environmental or cultural assets, conservatives protect freedom, progressives promote justice, and so on. Pinball Politics: Non-Linear Power Each of these institutions has both purpose and power. Purpose is what each stands for – its “why.” Power is how each advances its purpose – its “how.” To advance their objectives, most interest groups take a straight-forward linear path, using money and other forms of energy to tunnel through any opposition. This can work for longstanding institutions with a lot of power. In the face of change, most have a bias for the status quo, where their power lives. It is relatively easy to focus their power along the linear path being forged by change advocates, to stop them. This lasts a long time, but leaves the institution rigid, leading ultimately to its collapse. There are plenty of points along the path where power can stop change. This is not necessarily a bad thing. Linear change is often bad change. It fails to take account of legitimate vested interests. A better dynamic for change is what we call “pinball politics.” We line up five or more important change initiatives – by businesses, activists, government, foundations, and others. Then we explore how the power of each can be harnessed to advance the objectives of all. This helps us develop strategies to “pinball” past points of opposition, by harnessing the energy of unexpected allies. Not all these parallel campaigns have precisely the same ends. But they can all travel together at least part of the way toward their goals. Future 500 is a non-profit, but we have a keen appreciation for the purpose of profit. 121  

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We build relationships and alliances between groups that often demonize one another: Global corporations and social cause champions. Democratic and Republican activists. Conservatives, libertarians, and progressives. Religious and secular organizations. Any groups that feel their interests are at odds, but who are open to finding common ground. Our job is to know more about the dynamics across all these stakeholders than anyone else. For any issue we cover, we know dozens or hundreds of stakeholders across all categories. We see conflicts before they fully emerge, and we identify common ground no one else knows exists. We always keep confidences. Trust is fundamental to our work. Companies and stakeholders know we are only valuable to them if we are trusted by those we engage. Those who expect us to tell secrets don’t stay with us long. We use the profits from our work to further advance our purpose. When stakeholders begin to align around an important objective, we drive the process further, pressing them toward on-the-ground solutions in four areas: energy, water, recycling, and empowerment. Sometimes the objective is better business practices. We help major brands and retailers leverage their buying power, to drive better performance across their supply chains. Sometimes the objective is better public policy. We seek systemic solutions, often favoring market-based policies that put a price on pollution, so companies and consumers benefit by reducing external costs. The work is fun, fulfilling, and, we think, important. We have an amazing staff of smart and dedicated professionals, from the right to the left, with both business and non-profit experience. What unites them is a commitment to bring together the forces that can drive down the economic and environmental deficits that threaten our future. 122  

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Our staff members earn their salaries, and more. Perhaps we don’t always maximize our personal incomes. But we are maximizing our impact, fulfillment, and fun. I would be embarrassed and ashamed to do anything less. To help us stay on target, and remind all the companies and non-profits of our approach, we seek to operate according to ten core principles: • Integrity: To act in the interests of the whole – our partners, stakeholders, and society at large • Respect: To behave as equals in all relationships – with partners and stakeholders. • Expertise: To be the pre-eminent experts in stakeholder engagement on controversial, complex issues. • Feedback: To share mutual feedback with our partners and stakeholders, even if disagreeable. • Self-improvement To constantly seek to improve our skills and systems. • Reliability: To under-promise and over-deliver, meeting our commitments on-time and within organizational budget • Value: To deliver more in value than our partners and stakeholders provide in support • Adaptability: To change course instantly, as needed to better serve our mission and the social need. • Embedment: To transfer our skills and systems to our partners and stakeholders, so that they can do our work without us. • Systemic: To seek to solve problems and meet needs at their root. Sometimes, like other institutions, we lose sight of one or more of these principles. Then something happens that reminds us why they are important, and we deepen our commitment to them. 123