Peak Oil y la caida de la Union sovietica

Peak Oil And The Fall Of The Soviet Union: Lessons On The 20th Anniversary Of The Collapse

(This guest post by Douglas B. Reynolds, Professor of Energy Economics at the University of Alaska, Fairbanks, Department of Economics, SOM Phil Hart appeared at The Oil Drum. It is licensed under a Creative Commons Attribution-Share Alike 3.0 U.S. License.)

Synopsis: The causes of the fall of the Soviet Union are thought to be inefficiency and the Soviet response to the Reagan Administration’s military buildup of the early 1980s. However, a more plausible explanation is the decline in Soviet oil production caused by peak oil. This gives the world an example of a modern economy confronted by peak oil and what lessons we can learn from it.

Neo-Classical Economics

In the West, we have great economic Nobel Laureates such as Hayek, Solow, Freidman, and Samuelson, who extol the virtues of markets for organizing an economy. Yet their theories for how great markets organize an economy contrast sharply with the planned economies of the Union of Socialist Soviet Republics (USSR) and the Soviet East.

The odd thing is, the Soviet Union, even with a planned communist economy, managed to become a super-power with a military prowess that scared the West. Remember the Cuban missile crisis, or Khrushchev pounding the table at the United Nations with his shoe saying, “We will bury the West,” or the Sputnik panic?

Well, Kennedy (1987) shows quite profoundly that you can’t have that degree of military prowess and be a world super-power unless you also have a strong and vibrant economy to back it up which, against all doctrines of conventional neo-classical economics, the Soviet Union had. It produced over 2 million motor vehicles a year, over 100 million tons of steel a year, and hundreds of advanced MIG jet fighters every year. So either the Nobel Laureates are wrong about their emphasis on markets or we don’t have a correct picture of the Soviet Union and its economy at all.

However, we know that free markets do work, and upon close inspection, the Soviets actually did use markets:  managers of communist enterprises had to engage in trades and internal political markets to obtain scarce resources for production; people created their own private little gardens, “dachas,” that produced fruits and vegetables sold on farmers markets; workers were given bonuses as incentives to work hard; and the authorities allowed certain black markets to ease other Soviet planned inefficiencies. So in fact, the Soviet Union was market-oriented after all. Nobody has to give back their Nobel prizes just yet.  

Still, Robert Solow (1956) suggests that technical progress is the cause of four-fifths of the US output per worker, which suggests that it should also cause four-fifths or so of increases in Soviet output per worker. However, neo-classical economists emphasize that free markets give the incentives necessary for such innovations, which makes you wonder why was the Soviet planned economy able to essentially keep up with America when it was not be able to give as many incentives as the US could and therefore could not induce innovations as well as the US could.

One reason is that the Solow neo-classical growth theory is incomplete. Yes, labor, capital and technological innovation are important inputs into economic growth, but what Cleveland et. al. (1984), Cleveland et. al. (2000), Smil (1991, 1994, 2005) and Reynolds (2002) make so clear is that energy is a vital ingredient to growth and technology. If you take away energy, the labor, the capital and the technology inputs cannot do a thing.  As one physicist friend said to me once, “I bet (those economists) can’t even change a tire.”  

So what all of the Nobel Laureates, the Nobel committee for the economics prize itself, and indeed, most economists are missing is the essential role of energy as an input into economic growth. Energy must be separated as an input into growth and analyzed and econometrically modeled. If that were done consistently, then energy analysis would be one of the most central themes in the American celebration of the global economic rise as well as a central theme in our understanding of the Soviet economy. The American and Western economies rose not just because of technology alone, but because of the use of high quality energy, and lots of it. Similarly, the Soviet Union rose due to energy use too. The Importance of Energy for an Economic System

If we acknowledge that the Soviet Union had a powerful economy, which it did, and acknowledge that its economy was based on the same abundant, high quality energy that the US depended on, oil, then the reason for the fall is clear—peak oil.  The fall of the Soviet Union is a peak oil event and if we treat it as such, then we can begin to understand what is in store for our own economy. Indeed, the fall of the Soviet Union is a perfect economic experiment for what will happen to our own world economy as peak oil continues. 

According to the Economist (2010), the world is experiencing a rising cost for extracting energy because the energy needed to extract energy is rising, i.e. this is the concept of a falling Energy Return on Energy Investment (EROI). See Cleveland et. al. (1984), Hall et. al. (1986) and Hall (2008). What is more the Economist finally says what so many others, like Hamilton (1983), have been saying for years, that energy costs are affecting the economy. A decreasing EROI is in turn a general way to explain peak oil as it implies you can no longer find high EROI energy, e.g. conventional oil in large reservoirs but are instead finding low EROI oil, such as oil in small reservoirs. The decreasing EROI also implies another problem for the economy because the substitution away from high EROI oil is increasingly inelastic (Reynolds 1999c) and creates a loss of the Entropy Subsidy (Reynolds 1998). In other words, peak oil will cause economic decline. However, if peak oil is affecting the world, than why would it not have affected the Soviet Union too?  Clearly it did.

No one has studied closely the Soviet Union’s EROI to see, like our current world economies, if EROI was declining within the Soviet system and therefore affecting the Soviet economy. Nevertheless, one way to analyze the fall of the Soviet Union is to simply analyze its conventional oil use, which has been studied, see Reynolds and Kolodziej (2007 and 2008) and Reynolds (2009, 2001, and 1999a).  Nevertheless, before we can look at a peak oil theory for the fall, it would be good to look at the alternative Soviet collapse theories that abound.

Alternative Soviet Collapse Theories

The Economist (2009), for its part, claims that it was a decline in total factor productivity (TFP) that may have caused the fall of the Soviet Union.  However, upon a close inspection of Beare (2006) and Easterly and Fischer (1995), articles which surely would have been referred to in a TFP analysis, it is shown that in fact TFP was always growing, although at a declining rate, but growing nonetheless.  Thus, a slow growth in TFP can only cause an economy to grow more slowly, not collapse.  The upshot is that the Soviet TFP was not declining for 30 years as the Economist claims, but its rate of growth of TFP was declining. Still a poor TFP performance cannot have been the cause of the Soviet demise as even China had a poor TFP performance before its embrace of free markets and the Chinese Communist party is still going strong. 

Another hypothesis for the fall is the “Reagan Doctrine” hypothesis, where the US Presidential Administration of Ronald Reagan increased military spending and support of Soviet opposition in Poland and Afghanistan, which may have also caused the fall. But economists have yet to falsify that hypothesis although more than that, it doesn’t make sense.  Reagan came into office after the USSR’s 11^th Five Year Plan (1981) was already in place.  With a Soviet Union as inefficient as it is said to have been, the Soviets would have needed time to react to Reagan’s military spending and then plan what to do.  In fact, it would have been too difficult to start reacting to Reagan within the 11^th Five Year plan without rewriting and reorganizing the whole plan, a feat that would have taken years. Better to change the 12^th Five Year Plan starting in 1986) instead and begin to react against Reagan’s policies then. 

However, the 12th Five Year Plan does not show any evidence of a huge change in defense spending, nor was there any recorded change in defense spending until about 1988, nor are there any other signs of change before then such as a radical increase in the number of missiles. That means the hypothesis, which depends on the idea that defense and internal communist police spending were taking away investment into new productive capital, would require many years after 1988 before an effect on the overall Soviet economy should have been observed, yet the fall started to happen in that very year of 1988 as that is when Eastern Europe, part of the Soviet Empire, started to have problems. Also, the propaganda surrounding the 12^th Five Year Plan was one of openness (glasnost) and development (uskoreniye) not one of military spending increases or the need to more adequately defend the Soviet homeland. It seems highly unlikely that it was the 12^th Five Year Plan that could have caused a precipitous fall in the Soviet Union that actually started in 1988 only two years after the beginning of the plan.

So what is needed is to take a different analytical tack in assessing the collapse of the Soviet Union, away from the political, economic and military propaganda, and consider the USSR as an energy system. Clearly it used the same high quality energy resources that the US and the rest of the world did, see Table 1, so that means that not only did the Soviet Union use some free market principles, parallel to the West, but it used almost the same energy systems as well.  If we analyze the Soviet Union as an energy system therefore, rather than as a political or even economic system, then we can start to understand both its great economic output in spite of its inefficient planning and its great fall in spite of its internal (albeit black) market system.

See Also: Why Time Is Short Now That We're Past Peak Oil

The energy cost effects on the Soviet economy

To start with, it must be understood that as Reynolds (1994,  2002) points out, conventional crude oil is the most valuable of all energy resources, because it is a liquid (state grade). This is why for example oil sells currently for about €10 per Gigajoule ($14/mmBtu) while coal sells for about €2 per gigajoule ($3 per mmBtu).  Also oil has 20,000 Btus per pound (weight grade), 1 million Btus per cubic foot (volume grade) and 500 billion Btus per acre in-situ (area grade). See also Smil’s (1991) concept of power density. In aggregate, as a sort of energy theory of value, oil has the highest energy grade of any energy resource. It also has the highest energy return on investment (EROI) than any other energy when considering large conventional oil fields. See for example Hall (2008).  So looking at the value of oil, it is clear why the Soviet Union rose to prominence as it was able to produce so much cheap oil upon which to base its economy. Oil smoothed out Soviet inefficiency. However, the Soviet Union fell when its oil production fell and it no longer had cheap, high quality energy. 

In fact, isn’t it the case that oil is the real reason that the US economy grew so rapidly during the early 20^th century too, and then so slowly after 1973, the year of the first oil shock, as Cleveland et. al. (2000) show? Thus the Soviet Union and the US both had vast resources of oil and both grew powerful because they both exploited oil so much. Both economies extracted oil quickly, although the so called inefficient Soviet Union managed to exploit its oil resources even faster than the so called efficient USA:  a 10% rate of growth in oil production for the USSR in its early years and a 7% rate of growth in oil production for America in its early years. However, both the Soviet Union and America saw peaks in their oil production, the US in 1970, as M. King Hubbert (1956) and many others (see Brandt 2010) predicted; the Soviet Union in 1988. See Figures 1 and 2. Thus the US shows that no matter how advanced or efficient an economy is—and the US is one of the best—you will eventually endure peak oil, and that an oil shock caused by oil scarcity can affect your economy adversely.

The Chicken or the Egg?

Being a closed economic system, the USSR and the Soviet East had very little trade with the West and so that system had to depend completely on its own oil production. When Soviet oil production declined, so did its economy.  You could argue that a lack of markets, Soviet inefficiency or the political chaos in the 1980s caused the production to fall, but as spelled out in Reynolds (2000) and Reynolds and Kolodzej (2007, 2008) the only thing that makes sense is that scarcity caused the decline in oil production first and that the decline in oil production caused the collapse of the Soviet East afterward.  After all, why did only Soviet oil production decline but not Soviet natural gas production, two industries that are very similar, if inefficiency was so rampant?  Why did Soviet oil production increase before 1980 without much Western technology only to suddenly start declining after 1980 even when the Soviets had access to Western technology? And why did a period of glasnost cause the Soviet Union and the Soviet oil dependent Eastern Europe to collapse, but a similar glasnost caused China to rise and stay communist?  The only explanation that works is the dependency on internal cheap oil and the peak oil hypothesis.

If you look closely at the news prior to the collapse of the Soviet Union, you see that first Eastern Europe went through economic chaos starting in 1988, the year of Soviet peak oil, followed by Russia in 1990 and beyond. Interestingly, once the Soviets saw their peak in oil in 1988, they forced all the Council of Mutual Economic Assistance (CMEA) countries to pay for their Russian derived oil in hard currency and at Western oil prices. But the Eastern European countries had no such currency to pay for oil and so they had to curtail their use of oil.  Well, without any (almost free) oil available, you cannot run a modern economy no matter how efficient it is let alone an inefficient communist one.  This caused the Eastern European economies to collapse and revolutions in Eastern Europe to erupt starting in 1988.  Basically there were about 20 “French Revolutions” in the span of four years as communist government after communist government fell. 

Clearly, then 1988 is the initial point of the overarching fall of the Soviet Union when you include its regional influence in Eastern Europe.  But as Soviet oil production continued to decline after 1988, peak oil affected the Soviet economy as well, causing its collapse.  The Soviets eventually endured their first stagflationary shock in October of 1989 when their currency was devalued by 90%.  Eventually, as the Soviet economy fell each of the Soviet Republics from Lithuania to Kazakstan left the Union. And during that whole time Soviet and post-Soviet oil production fell from a high of about 12 million barrels of oil produced per day to a low of about 7 million barrels a day, a 40% decline. So the real reason for the fall of the Soviet Union was an oil crisis. It was the third major oil crisis of the 20th century after the 1973 and 1979 oil crises, but you never hear of it. 

The Post-Soviet Oil Rise

You might ask, if there was peak oil in the Soviet Union during the fall, then why did former Soviet oil production rise again after 1996? Doesn’t this mean that there was plenty of oil and that it was their own inefficiency that caused the collapse in oil production? To answer this question consider a parallel question. Why did the ancient Babylonians of Mesopotamia fall? After all, if the ancient Babylonians had modern 21st century technology, they would not have fallen. Well, they did not have that technology, but then neither did the Soviets have a lot of Western technology, not because the Soviets did not buy much new oil technology from the West, but because their system was not set up to use that technology.

The main reason for the rise in Post-Soviet oil production was that there was a change in relative prices between energy and labor, a change in property rights and a change in the over-arching market structure behind the use of such technology. See Dienes (2004) for the complete analysis.  During the Soviet era, the oil production enterprises used simple primary and secondary oil production techniques to produce the massive oil that existed. However, the enterprises depended on Soviet technology, Soviet supply lines and above all were under Soviet government dictums. This is where we must also use conventional neo-classical economics to understand events. Remember, oil was basically given away at a low cost, but there was an initial government plan and investment to get it, i.e. a cost within the planned economic structure. Nevertheless, there was little incentive within the system to upgrade the necessary technology and invest heavily in new techniques because the price was set so low, although much investment did occur within the confines of the system. 

The one thing that Soviet oil enterprises could not do was to manage the oil resources to maximize the value of oil over the long term.  Better to produce quickly now, and ruin a field or waste oil, then to produce more slowly to maximize total value.  Nevertheless, such waste does not imply a lack of technology caused the fall, it implies a lack of oil caused the fall and that the lack of technical efficiency did not help matters.  After all, if the Soviets had had ten more Western Siberias of oil, or even 100 more, then their oil production would not have fallen—they would not have had peak oil—because more cheap oil would have been available. Still whether you have an efficient car or an inefficient car, it cannot run without any fuel.  

After the fall, once property rights changed, and the price of oil relative to other economic inputs, especially labor, was raised, it was relatively easy not just to bring in massive amounts of new technology to reinvigorate ruined fields, but also it was easy to manage the pace of production to maximize the fields’ long term value. Nevertheless, the fact remains that under a closed and bureaucratic system that was unable to change, oil became scarce within the confines of that system. Indeed oil production declined in America’s own oil sector under America’s so called advanced market based system.  Thus, with a closed and relatively less efficient system, it could not have been lower levels of technology, lower levels of investment and lower levels of management that caused a Soviet peak and decline in oil since Soviet technology and management—though inefficient—was always improving.  Rather it was oil scarcity, i.e. the lack of more large oil fields available, that caused the oil production decline. Indeed, Soviet investments into the oil sector were increasing as Gustafson (1989) makes clear. More investment, better technology, and more openness toward the end of the Soviet Union cannot cause a peak oil event, only scarcity can do that. 

Will the World Follow a Soviet Style Peak?

The Soviet Union endured a peak in oil production within its particular system.  Once the system changed, there was indeed a renewal of oil production, but even under the new system today there is again peak oil as figure 1 shows. However, just because a system can change, does not mean that the old system did not endure peak oil, it did.  Logic dictates cause and effect in time and context.  Thus while the Soviet Union’s region does not change from 1988 to 2010, its economic system did. Still, even if a more efficient system was put in place in that region and caused oil production to increase, that still does not imply that the fall of the Soviet Union was not caused by peak oil.   

The crux of the issue is, can the world also endure the same oil crisis event that the Soviet East endured?  Yes it can.  Seeing as the world is a closed system with a certain level of technology then it too is subject to peak oil and the economic consequences of that peak. We will surely endure the same crisis that the Soviet’s endured and indeed we already are, as the Economist (2010) tacitly, though unknowingly, admits. See Figure 3 to view where peak oil stands for the world. 

Many of those who look at peak oil consider the world’s peak oil, as shown in Reynolds (1999b and 2009), to be a short run phenomenon and that, rather like the Soviet Union, oil production will soon increase again possibly because of the Iraqis newly revitalized oil sector. However, a close comparison of the Soviet Union and the world suggests that the world will not suddenly have an increase in oil production as the Soviet Union did.   Consider these points:  First the Soviet Union had a huge increase in technology after 1996 and especially after its currency crisis in 1998.  Second the whole of the region of the Soviet Union, not just one little oblast, was changed.  Finally, most of the Soviet oil reserves shifted from state ownership to being privately held.  If we were to compare the world to the Soviet Union, none of these conditions are present, and therefore the world in total cannot possibly have a new round of oil production increases the way the post Soviet Union did. 

However, all of the oil producing countries of the world currently have the latest and greatest oil production technologies and access to any and all innovations.  So unlike the Soviet Union, there can be no technological revolution for the world.  Next, the world already has relatively free markets even in Russia and the Middle Eastern countries.  These free markets allow capital and labor to move relatively easily and quickly to wherever they are needed, and so an increase in free markets is not possible, they already exist.  Finally, as far as property rights are concerned, most oil producing countries are not about to turn over their vast oil reservoirs to private control as the former Soviet Union did. State ownership for most oil reservoirs will continue, and so a Soviet style increase in oil production for the entire world should not be expected. 

Thus in order for the world to increase its oil production on the same magnitude and relative scale as the former Soviets managed, you would need a worldwide revolution in technology, institutions and markets, not just a change in one relatively small oil producer of Iraq, and that is just not going to happen.

  The Soviet Union’s Peak Oil as an Economic ExperimentWhat so many Sovietologists and economists fail to consider about the Soviet Union is that the Soviets knew about peak oil, seeing as they had one of the most technically well-educated workforces in the world with top mathematicians, physicists and oil geologists. Indeed, the Soviets were actively trying to find solutions for peak oil with new energy technology. The Soviets clearly researched alternative energy technology previous to the fall, such as solar energy, oil shale energy and nuclear power, (CIA 1985).  Those same top people undoubtedly warned the Soviet brass about the problem of peak oil and there was indeed a tremendous increase in energy research and oil investment in the USSR. This bodes badly for our own predicament, for even though we have also conducted much alternative energy research and oil investment, the Soviets, and our own 1970’s energy investments show that alternative energy has never been able to help an oil crisis.

So knowing the world rate of oil production has already peaked, then what can we expect? The Soviet Union’s collapse offers a preview. We can expect a great stagflation, where you simultaneously see a declining economy and hyperinflation. We can expect to see high unemployment and a collapse in the world economy. We can expect to see governments without any money to pay for things like health care, pensions, environmental problems, prisons, education or defense.  We can expect to see infrastructure decay.  We can even expect to see a decline in population.  Finally, similar to the post Soviet Union, we can expect to see protests, political turmoil and revolution. 

The Origins of the Financial Crisis is from the Oil Crises of the Past

So, what the Soviet Union endured is exactly what we are seeing now. Indeed, the entire financial crisis and its own resulting political turmoil is not about finance at all, but about peak oil. If you go back to the US administration of Ronald Reagan and even before, the so called free market economic revolution that he inspired was really only a set of policies in reaction to the oil crises of the 1970s. To some degree these policies worked, such as deregulating airlines, but to some degree these policies did not work such as deregulating banks. This culminated in the 1990s with the Dot Com bubble and the currency crises of Asia and the developing world, and continued in the early 2000s with government policies to help the housing and construction industries grow beyond sensible levels.  However the culmination of the housing bubble occurred when all these people living on the edge of their limited weekly pay, could not simultaneously pay for gasoline, due to high oil prices, and their mortgages and had to choose to foreclose. Now that these bubbles have burst, there is nowhere left to hide.  No more growth is possible without more cheap energy.

As the Nobel Laureates explain, a free market system is about the best system available for society, but that does not mean free markets are powerful enough to overcome peak oil. Maybe economics needs a bit of engineering reality thrown in, but to be fair, many engineers, business people, physicists, biologists and so on, also believe in the power of technology.  By studying the economic events surrounding the fall of the Soviet Union, we can at least be better prepared to handle the consequences of our inevitable collapse. A full understanding of the economics of energy such as the EROI, energy grades, peak oil and the Hubbert curve, will help, although now it’s a bit too little, too late.  We just have to learn from the former Soviets and just handle each crisis as it occurs.

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This post was published at The Oil Drum.

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Reflexionando

"Nos procesos de cambio social ten que garantizarse que a participación popular esté sempre por debaixo do nivel de institucionalidade" Planteamento da gobernabilidad de Huntington.


http://www.nuevatribuna.es/media/files/2011/05/20/orenciomonedero.pdf

Idas de Olla

Shenguen

O terremoto que ha de cambiar a vison do Mundo de Xapon

Japan, the Persian Gulf and Energy

By George Friedman

Over the past week, everything seemed to converge on energy. The unrest in the Persian Gulf raised the specter of the disruption of oil supplies to the rest of the world, and an earthquake in Japan knocked out a string of nuclear reactors with potentially devastating effect. Japan depends on nuclear energy and it depends on the Persian Gulf, which is where it gets most of its oil. It was, therefore, a profoundly bad week for Japan, not only because of the extensive damage and human suffering but also because Japan was being shown that it can't readily escape the realities of geography.

Japan is the world's third-largest economy, a bit behind China now. It is also the third-largest industrial economy, behind only the United States and China. Japan's problem is that its enormous industrial plant is built in a country almost totally devoid of mineral resources. It must import virtually all of the metals and energy that it uses to manufacture industrial products. It maintains stockpiles, but should those stockpiles be depleted and no new imports arrive, Japan stops being an industrial power.

The Geography of Oil

There are multiple sources for many of the metals Japan imports, so that if supplies stop flowing from one place it can get them from other places. The geography of oil is more limited. In order to access the amount of oil Japan needs, the only place to get it is the Persian Gulf. There are other places to get some of what Japan needs, but it cannot do without the Persian Gulf for its oil.

This past week, we saw that this was a potentially vulnerable source. The unrest that swept the western littoral of the Arabian Peninsula and the ongoing tension between the Saudis and Iranians, as well as the tension between Iran and the United States, raised the possibility of disruptions. The geography of the Persian Gulf is extraordinary. It is a narrow body of water opening into a narrow channel through the Strait of Hormuz. Any diminution of the flow from any source in the region, let alone the complete closure of the Strait of Hormuz, would have profound implications for the global economy.

For Japan it could mean more than higher prices. It could mean being unable to secure the amount of oil needed at any price. The movement of tankers, the limits on port facilities and long-term contracts that commit oil to other places could make it impossible for Japan to physically secure the oil it needs to run its industrial plant. On an extended basis, this would draw down reserves and constrain Japan's economy dramatically. And, obviously, when the world's third-largest industrial plant drastically slows, the impact on the global supply chain is both dramatic and complex.

In 1973, the Arab countries imposed an oil embargo on the world. Japan, entirely dependent on imported oil, was hit not only by high prices but also by the fact that it could not obtain enough fuel to keep going. While the embargo lasted only five months, the oil shock, as the Japanese called it, threatened Japan's industrial capability and shocked it into remembering its vulnerability. Japan relied on the United States to guarantee its oil supplies. The realization that the United States couldn't guarantee those supplies created a political crisis parallel to the economic one. It is one reason the Japanese are hypersensitive to events in the Persian Gulf and to the security of the supply lines running out of the region.

Regardless of other supplies, Japan will always import nearly 100 percent of its oil from other countries. If it cuts its consumption by 90 percent, it still imports nearly 100 percent of its oil. And to the extent that the Japanese economy requires oil - which it does - it is highly vulnerable to events in the Persian Gulf.

It is to mitigate the risk of oil dependency - which cannot be eliminated altogether by any means - that Japan employs two alternative fuels: It is the world's largest importer of seaborne coal, and it has become the third-largest producer of electricity from nuclear reactors, ranking after the United States and France in total amount produced. One-third of its electricity production comes from nuclear power plants. Nuclear power was critical to both Japan's industrial and national security strategy. It did not make Japan self-sufficient, since it needed to import coal and nuclear fuel, but access to these resources made it dependent on countries like Australia, which does not have choke points like Hormuz.

It is in this context that we need to understand the Japanese prime minister's statement that Japan was facing its worst crisis since World War II. First, the earthquake and the resulting damage to several of Japan's nuclear reactors created a long-term regional energy shortage in Japan that, along with the other damage caused by the earthquake, would certainly affect the economy. But the events in the Persian Gulf also raised the 1973 nightmare scenario for the Japanese. Depending how events evolved, the Japanese pipeline from the Persian Gulf could be threatened in a way that it had not been since 1973. Combined with the failure of several nuclear reactors, the Japanese economy is at risk.

The comparison with World War II was apt since it also began, in a way, with an energy crisis. The Japanese had invaded China, and after the fall of the Netherlands (which controlled today's Indonesia) and France (which controlled Indochina), Japan was concerned about agreements with France and the Netherlands continuing to be honored. Indochina supplied Japan with tin and rubber, among other raw materials. The Netherlands East Indies supplied oil. When the Japanese invaded Indochina, the United States both cut off oil shipments from the United States and started buying up oil from the Netherlands East Indies to keep Japan from getting it. The Japanese were faced with the collapse of their economy or war with the United States. They chose Pearl Harbor.

Today's situation is in no way comparable to what happened in 1941 except for the core geopolitical reality. Japan is dependent on imports of raw materials and particularly oil. Anything that interferes with the flow of oil creates a crisis in Japan. Anything that risks a cutoff makes Japan uneasy. Add an earthquake destroying part of its energy-producing plant and you force Japan into a profound internal crisis. However, it is essential to understand what energy has meant to Japan historically - miscalculation about it led to national disaster and access to it remains Japan's psychological as well as physical pivot.

Japan's Nuclear Safety Net

Japan is still struggling with the consequences of its economic meltdown in the early 1990s. Rapid growth with low rates of return on capital created a massive financial crisis. Rather than allow a recession to force a wave of bankruptcies and unemployment, the Japanese sought to maintain their tradition of lifetime employment. To do that Japan had to keep interest rates extremely low and accept little or no economic growth. It achieved its goal, relatively low unemployment, but at the cost of a large debt burden and a long-term sluggish economy.

The Japanese were beginning to struggle with the question of what would come after a generation of economic stagnation and full employment. They had clearly not yet defined a path, although there was some recognition that a generation's economic reality could not sustain itself. The changes that Japan would face were going to be wrenching, and even under the best of circumstances, they would be politically difficult to manage. Suddenly, Japan is not facing the best of circumstances.

It is not yet clear how devastating the nuclear-reactor damage will prove to be, but the situation appears to be worsening. What is clear is that the potential crisis in the Persian Gulf, the loss of nuclear reactors and the rising radiation levels will undermine the confidence of the Japanese. Beyond the human toll, these reactors were Japan's hedge against an unpredictable world. They gave it control of a substantial amount of its energy production. Even if the Japanese still had to import coal and oil, there at least a part of their energy structure was largely under their own control and secure. Japan's nuclear power sector seemed invulnerable, which no other part of its energy infrastructure was. For Japan, a country that went to war with the United States over energy in 1941 and was devastated as a result, this was no small thing. Japan had a safety net.

The safety net was psychological as much as anything. The destruction of a series of nuclear reactors not only creates energy shortages and fear of radiation; it also drives home the profound and very real vulnerability underlying all of Japan's success. Japan does not control the source of its oil, it does not control the sea lanes over which coal and other minerals travel, and it cannot be certain that its nuclear reactors will not suddenly be destroyed. To the extent that economics and politics are psychological, this is a huge blow. Japan lives in constant danger, both from nature and from geopolitics. What the earthquake drove home was just how profound and how dangerous Japan's world is. It is difficult to imagine another industrial economy as inherently insecure as Japan's. The earthquake will impose many economic constraints on Japan that will significantly complicate its emergence from its post-boom economy, but one important question is the impact on the political system. Since World War II, Japan has coped with its vulnerability by avoiding international entanglements and relying on its relationship with the United States. It sometimes wondered whether the United States, with its sometimes-unpredictable military operations, was more of a danger than a guarantor, but its policy remained intact.

It is not the loss of the reactors that will shake Japan the most but the loss of the certainty that the reactors were their path to some degree of safety, along with the added burden on the economy. The question is how the political system will respond. In dealing with the Persian Gulf, will Japan continue to follow the American lead or will it decide to take a greater degree of control and follow its own path? The likelihood is that a shaken self-confidence will make Japan more cautious and even more vulnerable. But it is interesting to look at Japanese history and realize that sometimes, and not always predictably, Japan takes insecurity as a goad to self-assertion.

This was no ordinary earthquake in magnitude or in the potential impact on Japan's view of the world. The earthquake shook a lot of pieces loose, not the least of which were in the Japanese psyche. Japan has tried to convince itself that it had provided a measure of security with nuclear plants and an alliance with the United States. Given the earthquake and situation in the Persian Gulf, recalculation is in order. But Japan is a country that has avoided recalculation for a long time. The question now is whether the extraordinary vulnerability exposed by the quake will be powerful enough to shake Japan into recalculating its long-standing political system.

Quen son os donos das Axencias de Rating

Extraido dun artigo do Confidencial mostramos quen son os donos das axencias de Rating.

1. Standard & Poor's. Pertence ó grupo editorial estadounidense McGraw-Hill, unha empresa vinculada as ideas neoliberais e con diferentes publicacions de información económica de moito peso como The Economist. S&P e a bandeira do seu negocio financieiro, no que se incluen actividades como a creación de índices de bolsa, deuda ou materias primas; asi como ferramentas de análisis e recomendaciones.

2. Moody's con sede nos EEUU, conta entre os seus principais accionistas con fondos de inversión de todo tipo: desde hedge funds hasta plans de pensions. Pero entre todos eles destaca Berkshire Hathaway, o hólding financieiro de Warren Buffet.

3.Fitch. Pertence á empresa francesa Fimalac. Factura máis de 600 millons de euros anuais e tamén está controlada por accionistas privados. Detrás desta firma encontrase un membro da lista Forbes: Marc Ladreit de Lacharriere.

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