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Yearly Archives: 2015
by John Brian Shannon | December 31, 2015
While my default mode is to proactively engage with vision, leadership, pragmatism and organization, in order to preempt or preclude situations that allow dangers to form and thence for risk to concern us — there is certainly a time to take stock, to measure our place in the world, and to put our perceptions to the test in order to assess future threats.
Each year-end presents a wonderful opportunity to do exactly that.
We must keep in mind that every problem on this planet is a human-caused problem — and because we’ve caused them — we can solve them if we choose.
Humans alone wrote the madcap play that we’re the actors in.
The Eternal Question: Should We Steer Our Ship by the Stars, or by the Sea?
1. We must remember that when viewed through the prism of American or European thought, we in the West cannot fully understand the Russian mindset.
Yes, the Russians look like us, they buy many of the same products, they may even vacation in similar locales. But it would be a big mistake to think they are us or think like us based on those superficial comparisons.
Their national experience since October 1917 couldn’t be more different than our own.
Although the Soviet Union was founded on revolution, their experience in WWII (for example) was much different than ours. The people of the USSR endured almost inconceivable suffering and millions more deaths happened on the Soviet front as compared to our side of things during WWII, and so consequently, their response to us during the Cold War and their evident bias to not only end the Cold War but to disband their entire bloc and rewrite their constitution, were shaped by those experiences.
Suffice to say that the worldview of everyday Russians and their leaders are significantly different from North Americans and Europeans.
If we base our policies and subsequent actions on a flawed interpretation of the Russian mindset we are likely to be enablers of dangerous situations, resulting in increased risk.
Therefore, everything Russia must be viewed not only from the American or European world viewpoint, but through the lens of the Russian leadership and of the citizens of that country.
And frankly, that hasn’t been done as well as it could and should have been done, since the days of Kissinger, Brzezinski and James A. Baker III.
Our #1 risk factor isn’t Russia, it’s our lack of understanding.
2. China is a large country that isn’t going anywhere. We’ll be dealing with China for many decades to come. And they’ll be dealing with us.
If anything, we should avoid conflicts with China — and instead of always trying to ‘put them in the wrong’ we should become their guide, their facilitator, their mentor, and always be trying to ‘put them in the right.’
Every day of the year, we humans are teaching other humans how to treat us.
If we teach China that we are all about hostility, they’ll learn that fighting us is the way to deal with us. If we constantly criticize China, they’ll condemn us in return. If we give China reason to fear, we all know that “fear leads to anger, anger leads to hate, and hate leads to suffering.”
It’s a great Star Wars line, isn’t it? Still, it’s just as true on Earth as it is in adventure movies.
To lower our risk with China, we need discipline. We need to be setting the bar, showing the way, shining the light, and using constructive criticism — praising publicly and criticizing privately.
In this way, we’ll be the Father, the Mentor, the Guide, the Explainer — and what we teach China about who we are, will tell them how to treat us.
If we teach China that use of force always works and that diplomacy doesn’t — we’ll be the worse off for it, and so will they.
Yet, it will have been us that wrote that madcap play.
Kissinger’s shuttle diplomacy to Peking (Beijing) as it was then-called by the West, was a great start.
Smatterings of constructive engagement since, have been helpful (but only in a smattering kind of way).
And Obama’s ‘Pivot to Asia’ may yet turn out to be, in retrospect, inspired — if handled correctly and properly followed-up. And the recent joint U.S.-China CO2 reduction plan seems to have added some amount of normalcy that has been otherwise lacking in that relationship.
Yet, the Windows of Lost Opportunity have been stupendous!
It’s a somewhat unmanaged relationship, with far too occasional bright moments of successful diplomacy.
Had the Sino-American relationship been handled proactively and correctly all along, the $1 Trillion dollar Apple success story would have represented only one of many similar stories. Perhaps a thousand similar success stories.
In reality, thus far, the relationship between China and the U.S. has been one of staggeringly huge, missed opportunities, and even worse, minor sabre-rattling.
Although China seems a willing partner and wants to engage, the same cannot be said of America. Europe is doing a little better, but only recently.
If China represents a risk to the West, it’s because we’ve been very busy with less important matters.
3. Except for the Western-inspired ‘Arab Spring’ the MENA region might have made some small amount of forward progress in the 2010-2020 timeframe.
I doubt anyone would suggest that citizens of the affected countries are any better off now, as compared to pre-Arab Spring.
Yet with the Iran nuclear deal secured and Israel now turning to domestic issues, the >1400-year-old chess game between Sunni Arabs and Shia Persians will continue as uneventfully as ever, I suspect, for many decades. (Lots of smoke, very rarely, any fire)
Containing ISIS and keeping Western nations safe from ISIS terror attacks would be best served by getting Western nation forces out of Syria (leaving the Syrian situation to the Syrian government and the Russians) and concentrate on increasing the coalition presence in Iraq, with plenty of assistance for Turkey, which has two problems: millions of refugees and a security threat on its southern flank.
4. The world (not just the U.S. and Europe) needs a dedicated (and properly funded) cybersecurity organization on par with INTERPOL, but geared to identifying and combatting cybercrime in realtime, and to offer all manner and levels of support to domestic agencies involved in countering cybercrime.
EXAMPLE: Whether that proposed anti-cybercrime organization is assisting a small town 5-person police department putting together its first anti-cybercrimes programme, or is assisting the Chief of the NYPD cybercrimes division to combat a cybercrime in progress, or briefing Homeland Security or the Pentagon (and other police and security organizations in other countries) it must meet those agencies and departments where they are and provide what they need in realtime.
If not, catastrophic failure will be the result.
The present situation just isn’t up to the forming threats. As well-intended as each department and agency’s efforts in this regard surely are, their capabilities are at least one order of magnitude less than what is required to defend us from cyberattacks against government and industry infrastructure and cybercrime that impacts private citizens.
By 2020, it might be two orders of magnitude short of reasonably preventing the most serious cyberattacks.
We spend money to insure our cars and trucks (in advance of mishap or misadventure) for good reason, because on an otherwise average morning, we might step outside to find that $50,000. of damage has occurred overnight to the $70,000. vehicle in our life.
A properly funded and properly overseen global anti-cybercrimes support centre would provide the ‘insurance’ we need to counter future cyberthreats.
TO SUMMARIZE: We live in a world of risks
However, that doesn’t mean that we have to play their game — after all, why play to our opponent’s strengths?
With the right vision (to preclude falling into ‘risk’ in the first place) and the right leadership (to put that vision into practice, or at the very least, turn-negatives-into-positives if things go awry) and by providing the proper support for those who negotiate or fight on our behalf — we can either change the game completely to better suit our strengths — or at the very least, lower our risk.
And that, my friends, is how to play the game of Risk and win, more often than not.
- The Global Economy Confronts Four Geopolitical Risks (Project Syndicate)
by John Brian Shannon | December 28, 2015
Through no fault of their own, the Alberta government headed by Premier Rachel Notley is facing economic crisis due to the lowest global oil prices in years, and with lower prices ahead it goes without saying that Premier Notley and her new government need to either (a) cut spending or (b) boost government revenue.
If boosting government revenue is chosen, economists know there are only three ways for provincial governments to boost revenues;
- Raise taxation revenue
- Raise non-taxation revenue
- Transfers from the federal government
Let’s forget about putting any more holes in the Alberta economy via increased taxation as the province’s economy is under enough stress since the oil price crash.
Let’s also rule out the return of higher oil prices as oil prices are settling in for a long term run in the $30.-50. per barrel range. Why rule that out?
Simple. Millions of barrels of formerly sanctioned Iranian oil are about to hit the market, hard
For nearly a decade, Iran was sanctioned by Western nations and able to sell only small amounts of oil in the global marketplace. But the sanctions didn’t stop Iran from continuing to develop its oil industry, nor did it stop Iran from buying every spare oil tanker and storing their crude at sea, and in thousands of oil storage tanks on land until sanctions ended.
All of which is about to hit the global oil market.
‘Ready to Ship’ is perhaps an understatement as the sanctions scored a direct hit on the Iranian economy, consequently the country is very motivated to resume normal trade.
And let’s not forget the ‘wellhead price’ of oil in all of this
At the Alberta oil sands, the average extraction price for a barrel of crude oil is $56.20. That’s the average price. At some locations the extraction price can surpass $90./bbl.
In Saudi Arabia, still the world’s largest single oil producer, the wellhead price ranges between $14./bbl and $24./bbl (for #3-4 crude) and they can stand $40./bbl oil prices indefinitely. The Saudi producers don’t care how much the oil speculators are making, as long as the price remains somewhat over $24./bbl, they’re seeing profit.
But in Iran… wait for it… the wellhead price ranges from $1./bbl to $21./bbl and they have the world’s fourth-largest proved oil reserves.
Most Alberta oil may be best termed #4 (sour) on the pH scale, tar sands oil can only be called #4.5 or #4.75 and all Alberta crude oil is so sour that it must be blended with liberal amounts of Saudi #3 (sweet) or West Texas Intermediate before any refinery will accept it.
Much of Iran’s oil is of the #3 (sweet) variety, but unlike the situation in other oil-producing nations where most of the #2 (sweet) crude oil was extracted long ago, Iran ranks a close 2nd to Saudi Arabia in proved reserves of #2 crude oil — a perfect match to blend with Alberta’s sour crude.
Therefore, plenty of sweet and cheap-to-produce Iranian oil is about to arrive on the scene and I wouldn’t be surprised to see oil dipping to $28./bbl for a week or two once Iran’s oil exports begin impacting the market.
With the foregoing in mind, let’s look at three ways to boost the Alberta economy:
1. Alberta can still retain its ranking as an energy superpower in the coming decade of depressed oil prices by adding hundreds of wind turbines to the many wind corridors in the province
The Highway 2 corridor starting at the U.S. border heading north to Edmonton (and perhaps as far north as Athabasca) consists of rolling farmland with excellent wind potential. Any Albertan can tell you about the year-round winds native to that corridor, although they may not refer to it as a ‘wind opportunity’ in the same glowing terms as a wind turbine salesperson might…
Farmers can benefit by allowing wind turbines to be installed on their land.
Each wind turbine requires one acre of land (including service road) which makes that land unavailable for crops, therefore, utilities typically lease the land at $4000. per year/per unit.
Some farmers may allow five, ten, or any number of wind turbines on their property.
And good for them! They lose the ability to grow crops or graze their livestock on a fraction of their land, but unlike cash crop income, the wind tower lease payments are guaranteed regardless of the drought or flood situation.
And that non-weather-dependent annual revenue helps to stabilize farm income.
The typical wind turbine produces 1 MegaWatt(MW) of clean electricity and cost about $1 million apiece, although the newer (and more costly) wind turbines produce 2 MW.
Day or night, wind turbines produce reliable, clean electricity especially when situated in wind corridors and installed atop 100-200 metre towers. (Taller towers get better wind)
By selling GigaWatts(GW) of clean electricity to residents, businesses, industry, and via electricity exports to British Columbia, Saskatchewan, and to the northern United States, Alberta would retain its place as an energy superpower — regardless of the global oil price.
And we must always heed the words of Saudi Oil Minister, Ali Al-Naimi, “The Stone Age didn’t end on account of a lack of stones, nor will the Oil Age end on account of a lack of oil.”
The end of oil is coming. We need to begin planning for it. An energy grid that meets demand with 50% natural gas and 50% renewable energy and is strongly geared towards electricity exports is in our best economic and employment interests. The sooner we begin to walk that path, the farther ahead of other regional economies we’ll be.
Or, Alberta could drop the ball completely and become an energy importer from places like British Columbia, Saskatchewan, and the northern U.S. states. That might be a little too ironic for some Albertans.
A great way to create thousands of good-paying jobs in Alberta, not only installer jobs but wind turbine and tower manufacturing jobs, is by negotiating with wind turbine manufacturers, and separately, wind tower manufacturers, to build assembly plants in Alberta.
If all the stars aligned, the province could become the defacto capital of Canada for wind turbine and wind tower manufacturing.
And the province has the potential to become an important centre for wind power technologies, by providing the proper funding to the Northern Alberta Institute of Technology (NAIT) and the Southern Alberta Institute of Technology (SAIT).
There isn’t a reason good enough to prevent Alberta from installing 1000 wind turbines per year within its provincial boundaries AND selling another 1000 wind turbines and towers per year to other jurisdictions in Canada. That’s just the Canadian market, and quite separate from the true north strong and free there’s a big windy world out there.
More jobs, guaranteed income for farmers, cleaner air via clean electricity generation, a better economy due to massive electricity exports and higher tax revenues… what’s not to like about wind power in Alberta?
2. Natural Gas as a baseload energy fuel
Due to historical factors, such as the historically low cost and low technology required to produce heat and electricity from coal, (and also due to the low price of massively-subsidized nuclear power) natural gas became a sort of ’boutique’ fuel used to produce power at so-called ‘peaking’ power plants.
Whenever the coal or nuclear power plants couldn’t meet peak demand, say during summer afternoons when every air conditioning unit was working at maximum capacity, peaking power plants could quickly ramp-up to meet peak demand.
Natural gas power plants can ramp-up or down in minutes, as opposed to coal-fired power generation or to nuclear powered generation, which can take hours or days to ramp-up or down.
With much lower natural gas prices (below $2.00 on the Henry Hub index as of 12/28/15) a huge window of opportunity exists for non-centralized natural gas-fired power generation to enter the energy market as an equal player instead of as a pinch-hitter.
Due to ever-stricter clean air standards and the concerns surrounding global warming, and the obscene water usage of coal-fired and nuclear power plants, natural gas looks to replace coal and nuclear saving billions of subsidy dollars in the process.
Use a cleaner fuel for a cleaner burn
Modern natural gas-fired power generation releases less than half the amount of CO2 as compared to coal-fired power generation.
And that’s just the story on Carbon Dioxide emissions.
It’s the other emissions that are the real problem with coal-fired power generation; It’s things like airborne mercury and heavy metal vapours, sulfur dioxide, oxides of nitrogen and particulate (smoke, ash, and soot) that are the real nasties.
Then there are the thousands of tons (Alberta only) or millions of tons (globally) of fly ash that must be transported and safely buried annually, far from aquifers.
The good news is that natural gas burns up to 1,000,000 times cleaner than brown coal (lignite) and up to 10,000 times cleaner than the cleanest-burning grade of coal (anthracite).
“Each stage in the life cycle of coal—extraction, transport, processing, and combustion—generates a waste stream and carries multiple hazards for health and the environment.
These costs are external to the coal industry and are thus often considered “externalities.”
We estimate that the life cycle effects of coal and the waste stream generated are costing the U.S. public a third to one-half of a trillion dollars annually.
Many of these so-called externalities are, moreover, cumulative.
Accounting for the damages conservatively doubles to triples the price of electricity from coal per kWh generated, making wind, solar, and other forms of nonfossil fuel power generation, along with investments in efficiency and electricity conservation methods, economically competitive.” — Harvard Medicine | Full Lifecycle of coal
As for matching up with wind power, there isn’t a better partner than natural gas-fired power generation. In perfect harmony, natural gas can ramp-up and ramp-down on a minute-by-minute basis to meet Alberta’s electricity demand and can add capacity to electricity exports.
3. Promote Alberta Tourism in a Massive Way
Until now, provinces like British Columbia, Ontario, and Quebec have dominated the Canadian tourism market. And millions of tourists visit British Columbia without ever knowing about the jewel of a province next-door. That must change in 2016.
BC and Alberta must become partners in attracting tourists by launching complementary tourism campaigns in foreign countries — making it seem to prospective tourists that there are so many reasons to visit Western Canada that they decide to visit both provinces and forego travelling anywhere else.
In what other country can you take a cruise ship to a major cosmopolitan city like Vancouver, golf in the morning, ski in the afternoon, enjoy fine dining at night, then hop onboard a scenic VIA RAIL train to Banff, Alberta?
There you can enjoy ice-skating, snowboarding and cross-country skiing or nature hikes, and of course, more fine dining.
Or stay at a working ‘Dude Ranch’ in Bragg Creek rounding-up cattle and wearing your best cowboy hat.
Each $1.00 spent to boost tourism typically returns a minimum of $6.00 making investments in tourism de rigueur for governments wanting to provide jobs and increase government revenues.
Compared to energy megaprojects which take years to ‘break-even’ investment returns from tourism typically happen within 24 months.
Of the easiest and surefire ways to stimulate the Alberta economy, this is likely it.
Tourism requires a relatively small annual investment, a medium-sized commitment from the government, and features a 6-to-1 payback within two years. Not bad.
Although not as large as other segments of the Alberta economy, tourism pays back quickly and requires only moderate effort on the part of the government.
I hope Premier Notley makes tourism one of the first priorities of her government in 2016 — even as she works out longer-term and higher reward arrangements to secure a better energy future for Alberta.
by John Brian Shannon | December 15, 2015
“Sweden, Norway, Finland and Denmark (collectively the Nordic countries) have a combination of high living standards and low income disparity that has captured the world’s attention. At a time when the growing gap between the rich and poor has become a political hot button in developed nations, the region known as Scandinavia has been cited by many scholars as a role model for economic opportunity and equality.” — Investopedia.
There isn’t a country in the world that shouldn’t be able to match the high living standards set by Norway
Norway provides us with an example that all nations should strive to meet or exceed within a few years’ time
In fact, if we’re doing it right, the stellar Norwegian example will come to be seen as the standard for successful economic policy, instead of the outlier
But first, let us count the ways that Norway succeeds:
- The highest accumulated revenue surplus in the world, worth $1 Trillion (held in a sovereign pension fund)
- Strong and steady GDP growth (see chart below)
- Very low Debt-to-GDP (see chart below)
- A #1 to #4 ranking on the UN Happiness Index (varies by year)
- A #1 ranking on the Social Progress Index (see chart below)
- Typically a #1 or #2 ranking on the highest per capita income in the world
- In the Top 5 worker productivity rankings in Europe (and by extension, the world)
- One of the lowest crime rates in the world
- One of the ‘least corrupt’ nations. Ranked #5 on the Corruption Perception Index
- An average 2.5% unemployment rate (except during the global financial crisis where it shot up to 5.5%. Not to worry, it’s already fallen to 3.0%)
- Free university tuition for all citizens and residents
- Free universal healthcare ranked 7th in the world (It would rank higher, but maintaining full-service Hospitals in remote regions with tiny populations is uneconomical)
- Virtually 100% of the country is powered by renewable energy except for some remote settlements where a microgrid (natural gas power) is the only choice
- Unparalleled diplomatic credentials. Everyone knows Norwegians are among the best ‘honest brokers’ in the diplomatic world making Norway the ‘go-to’ arbitrators for nations in crisis
- A favorite country of the Olympics committee having hosted successful games twice in recent years
Do you think Norway’s success only happened since 1990 when oil and gas began to be extracted off the Norway coast? Do you think Norway’s success happened by accident?
Well, you’d be wrong on both counts.
The economy of Norway has grown at a rate better than that of any developed nation stock market, just as it was designed to do. And growth rates were steady prior to the large-scale extraction of petroleum in the country, and remain steady.
Yes, you heard right. The growth rate of the Norwegian economy beats many stock market indices as measured over the decades.
Who wouldn’t want to invest in Norway’s public/private investments, in Norwegian business generally, and in the highly educated workforce with its high productivity rate and so much more?
Successive Norwegian governments have limited deficit spending to a maximum of 4% of GDP during ‘bad years’ — and used budgetary surpluses to paydown government debt during ‘good years’
Here’s what that looks like.
Norway’s success didn’t happen by accident, nor did it occur after suddenly striking it rich in the undersea oil and gas fields
Other countries have struck it rich by discovering oil (or other massive resources) and haven’t experienced the positive outcomes seen in Norway. Where are their UN Happiness Index ratings, or productivity stats, or their per capita income stats? Nowhere near Norway’s, that’s for certain.
So why Norway?
Maybe the question should be, “Why only Norway and not every country?” — as every country could and should be seeing the same level of success as Norway.
Some people might question that their particular country, large or small, could excel like Norway.
But low ambition is the enemy of great accomplishments
If you aim low you’ll surely meet your goals. Conversely, if you aim high, you’re likely to excel. The Norwegians aimed high and succeeded — and good for them!
Many years ago, everyone believed that it was impossible for a human to run a 4-minute mile. And with each retelling of that erroneous belief it became that much more true.
After all, if it was that impossible, why bother trying?
Yet, one man, Roger Bannister from England, decided that he would aim high and run a mile in less than 4 minutes. And not long after making that decision, he did.
Since Sir Roger exceeded that expectation, many thousands of athletes have. It’s almost commonplace nowadays for professional athletes to run a 4-minute mile as part of their overall training programme to prepare for competition.
Norway is the Roger Bannister of nations!
By getting the fundamental economics right, Norway set itself up to succeed every time an opportunity to succeed, appeared. And that in a nutshell, is the measure of successful governance.
Norway with its smallish, mostly ice-covered landmass and its tiny population of only 5.1 million residents has $1 Trillion dollars in the bank!
It’s true. The Norwegian government has carefully invested its revenues and sharply limited government spending to the point that the Norwegian government may not (by law) run a budget deficit of more than 4% in any given year.
By limiting spending in this way, it allowed government revenues to accrue ‘during the good years’ while the economy was booming, and it limited spending during the lean years.
“But Norway is rich because of their offshore oil and gas revenues.”
If oil and gas are the reason Norway is doing so well, then why was Norway wealthy and well-governed prior to the exploitation of their offshore oil and gas?
“Well then, Norway was rich because of its offshore fishing industry.”
But Norway was wealthy and well-governed even before large-scale commercial fishing fleets ruled the seas.
“Norway must be rich from its tourism industry.”
Yet the booming Norwegian tourism industry is only a recent development.
“But Norway must have been rich because of its strong timber industry.”
The same applies. Norway was a wealthy and well-governed country prior to large-scale mechanized forestry.
This conversation could go on for some time… so let me shorten it up for you.
The reason that Norway excels is because Norwegian politicians of all stripes agreed long ago that Norway should ‘live within its means’ and bank surplus government revenues for use in later years
And it has worked wonders for the Norwegian economy, for Norwegian citizens and non-citizen residents, and for global investors.
It isn’t all about the resources! It’s all about the good stewardship!
By strictly applying the Norwegian model of governance every country could see similar levels of success.
Some people might say, “Well fine. But our country has no resources.”
But every country has resources of some kind. There isn’t a country in the world that couldn’t maximize its resources to match or exceed Norway’s stellar example.
And Hey! Citizens are a ‘resource’ too. Just look at Taiwan’s success! And that high level of success occurred despite it being a land of very limited natural resources.
I challenge anyone to make the case that their country couldn’t excel given 10 years of strict application of the Norwegian economic model
You can’t win that argument. Even ice-covered Norway with only 5.1 million citizens, is an easy winner in the competition for the most successful nation as measured by per capita statistics.
They Began with the End Result in Mind
Including the most important statistics of all — the ones from which all positive stats flow; A very high ranking on the UN Happiness Index and the Social Progress Index. (Say that three times, to let the profundity of that statement sink in)
Again, it isn’t about the resources it’s about advanced governance
In Norway, it’s about helping businesses to thrive — while putting the well-being of citizens and residents first!
It’s about ensuring a strong, stable, and vibrant society, and it’s about ensuring excellence in economics and governance.
And that, my friends, is the secret of Norway’s success.