The earth is hot, flat, and crowded — and getting more so with each passing year. We have passed over the edge of global crisis; all that remains now is what to do about it. The only way forward is to embrace environmental technology, and America can either lead the way or be dependent on technology and energy developed elsewhere. In this book summary of Hot, Flat, and Crowded 2.0, you will learn about the political crisis that put us here, and how to extricate ourselves from it.
How we became a generation that devours wealth — and how to start turning things around.
READ THIS BOOK REVIEW IF YOU:
- Want to cultivate an ethic of sustainability, both financially and environmentally
- Care how environmentalism can be patriotic and advance national and global security
- Are curious how climate change works and how it can be mitigated
Introduction
It may seem odd to begin a book on environmental crisis with stories of financial collapse. However, this is the logical place to begin because it reveals that the financial meltdown of the first decade of the 2000s and the melting of the polar ice caps have a shared cause; the unsustainable environmental and financial conditions that the world is grappling with come from the same bad habits. These habits are underpricing risk, a lack of commitment and accountability, and a system that privatizes the gains of risky behavior while socializing the losses.
Underpricing risk means, broadly, failing to account for the true cost and danger of operating in a certain way. The subprime crisis illustrates this plainly. The mathematical models that made bundles of “good” and “bad” mortgages look like a safe bet were based on the assumption that, surely, they couldn’t all default at once — and then they did.
Selling mortgages on to increasingly remote financial institutions and flipping houses as mortgage rates reset also introduced a culture of limited accountability. Everyone was operating on the mentality that, even if the situation was precarious, “I’ll be gone when the bill comes due.” The people who created the risk got to keep the profits while passing the losses on to someone else. In the case of banks, which were “too big to fail,” that someone else was the American people.
The case of the Wilkins Ice Shelf in western Antarctica shows how these same practices set us down the path of environmental destruction. This shelf began to crumble in 2009, the same time the global economy was in free fall. The shelf lost a third of its area within a decade. Why? Because energy companies sold hydrocarbons at prices that did not reflect the environmental cost. As with the banks and hedge funds, private gains were made at the expense of public good, and the increase in the global standard of living in this generation came about in a way that robs the next generation of theirs.
Instead of being a “grasshopper generation” that devours wealth — both natural and financial — at the expense of the future, we have a chance to become the “regeneration.” Taking inspiration from the sacrifice and patriotism of the Greatest Generation, Americans could lead the way to a green future by treating environmental damage as the genuine threat to our security and independence that it is.
Where We Are
We are at the dawning of the Energy-Climate Era — so named for the challenges that will define the epoch to come. The key problems we face: growing demand for ever-scarcer resources, a transfer of wealth to oil-rich countries and petro-dictators, disruptive climate change, energy poverty, and accelerating biodiversity loss. That is to say: the earth is becoming hot, flat, and crowded.
How crowded is the earth getting? By 2030 an estimated 5 billion people will live in cities. Moreover, by 2053 the global population will have tripled from its 1953 level. There will be exponentially more people, and there will be a large population of young people looking for stability and a future on our warming planet.
The flattening of the global economy is a product of technological advancement and the collapse of communism. As more people were able, through the internet and the end of Cold War isolationism, to enter the global market, the demand for a middle-class lifestyle, with cars, meat, and air-conditioning increased, just as the resources to enable that lifestyle started to run out.
The world is getting hot too. The increase in global temperatures since the start of the Industrial Revolution in the 18th century is having demonstrable effects on our global ecosystem. Because of greenhouse gases — carbon dioxide from cars and even methane gas from farming — the effect that keeps the earth habitable by trapping heat from the sun has been enhanced to the point that it is cooking the planet. Just as a small change in body temperature produces a fever in a person, a small fluctuation in global temperatures is producing all kinds of nasty symptoms for life on earth.
China and India face an increasing demand for infrastructure to support their growing populations. However, everything from oil to aluminum is getting more expensive. The subsidies that countries like the United States had in place to keep the prices on these goods low are becoming unsustainable.
This same demand transfers power to oil- and gas-rich countries like Saudi Arabia and Russia. When Russia cut off Ukraine’s natural gas access in 2006 as a way of asserting political dominance, this action was all the more powerful because of European dependence on Russian gas. Energy dependence increases the power of dictators with access to hydrocarbons.
The fever throws of our heating planet can be seen in the increasing number of environmental crises. An early warning was Hurricane Katrina. In 2007 the UN Intergovernmental Panel on Climate Change reflected on the hurricane and concluded that global warming was an unequivocal reality and that it would have sudden and irreversible effects, including floods, droughts, heat waves, and wildfires. And things could get worse. The consequences of a 10-degree change in global temperature will be far, far worse than those of an increase of only 1 degree.
As access to resources becomes increasingly scarce, energy poverty and its political consequences become more and more of a concern. For example, in 2007 a series of blackouts hit South Africa and Zimbabwe. The results were politically explosive. The sudden loss of the material and economic benefits of electrification is a recipe for political unrest.
Our planet has also reached its biodiversity tipping point; we are entering an age of mass extinction. For many, it was the extinction of the Yangtze River dolphin that drove this point home. While many smaller species had been dropping off, this was the first large mammal to go extinct because of human activity in a century.
Despite these challenges, these problems also offer opportunities. We have reached a point where everyone on the planet will be forced to pay the true cost of their energy use; despite borrowing from future generations, our environmental savings account is empty. Nonetheless, technology that provides clean, cheap energy is the next big industrial opportunity — and America can and should take its place as an innovator in that field. Imagine if the best and brightest in the country put their efforts into solving our energy problems instead of into designing the kinds of financial calculation formulas that helped justify the risk taking that led to the mortgage crisis.
Our country needs a “code green,” an approach to environmentalism that is strategic, geopolitical, patriotic, and capitalistic. Even if climate change turns out to be less severe than predicted, a smart green economy will still be more strategic and efficient than our current one. On the other hand, the risk of climate change being as severe as all the scientific data suggest, and continuing on the current path, is incredibly high.
What would a code green look like? It would use scientific innovation to create more efficient energy use. Family planning would slow the rate of population growth — not through restrictive laws but through increased access to information. An ethic of conservation would build a system of values based on minimizing impact on the environment. This could start with small changes, such as businesses being required to turn their lights off after-hours.
Adaptation will be necessary. We have crossed a threshold — some change is unavoidable. We must consider whether and where to strengthen shore protection as coastal weather becomes increasingly violent, where urban tree planting can make the biggest impact, and so on.
How We Move Forward
It may seem like we are already in the throes of a green revolution — every magazine, TV show, and website seems to offer tips on “easy” ways to go green. However, there aren’t a bunch of easy ways to save the earth — there isn’t even one. A true green revolution will not be easy and will not be painless. It will require a real change in the way our normal lives operate, because our “normal” is not sustainable. However, just because it isn’t going to be easy doesn’t mean it’s impossible — as many in the oil and gas industry would like people to believe — and we shouldn’t just give up and give in to continuous consumption.
Princeton University’s Carbon Mitigation Initiative came up with 15 proposals — some carbon-free, some carbon-reducing — that, with large-scale implementation of any eight or substantial implementation of all 15, would prevent the amount of CO2 in the atmosphere from doubling by the middle of the 21st century. Proposals include doubling the fuel efficiency of 2 billion cars; increasing wind power fortyfold to replace all coal power; halting all cutting and burning of forests; and cutting electricity use in homes, offices, and stores by 25% and carbon emissions by the same amount. None of this is easy — achieving even one goal, let alone eight, would take incredible political and social leadership. That the politically feasible responses to climate change fall so short of the necessary responses is one of the most pressing crises to tackle. Perhaps a way to do that is to envision what a green revolution might look like.
One pending driver of the green revolution is the energy internet — a system that could take technological advances and turn them toward maximizing efficient energy usage. In such a future, the energy of every appliance and device in your home could be tracked, and efficient energy use would garner financial rewards. Instead of a flat rate based on kilowatts per hour, you would sign up for a cheap, offpeak plan that would flatten the demand for energy. A variety of tailor-made plans would discourage inefficient and environmentally hazardous usage. Solar panels and electrochromic glass would be used to create self-sustaining, net-zero buildings that send energy back into the grid by making the most of solar light — for power and as an alternative to heating and air-conditioning.
While this might seem like a far-fetched, far-off future, the technology to achieve it is with us today and being tested in pilot communities. A green revolution may seem as daunting as hiking Mount Everest, but the tools we need for the climb are already available.
China
On a global scale, from population share alone, China has a huge impact on the climate. Can Red China ever become green?
The truth is, China can no longer afford to wait to clean up environmentally until it feels economically ready. There is an intuitive sense of unfairness that developing economies in the East are not able to grow economically at the expense of the future the way the United States and Western Europe did. Nonetheless, the Chinese government has realized that, although it must continue to grow economically to eschew political unrest from its ever-growing population, it must grow greenly — lest the deaths of Chinese citizens as a result of its coal-powered energy economy give rise to the same unrest it is trying to avoid.
So, though China is still just as focused on GDP growth, it has shifted toward green GDP growth. Despite mixed results, the Chinese government has, at least on paper, committed to ambitious environmental goals and is one of the leaders in developing environmental technologies. In 2008, Vestas, a Danish wind turbine company, saw 35 new Chinese competitors (but not a single one from the United States).
When it comes to energy technology, the great industrial opportunity of our era, the United States has a chance to lead the way or follow others — but the rest of the world, and certainly China, will not sit still and wait while we decide.
America
America’s energy crisis is a crisis of government as much as anything else. Without clear and credible energy targets, political policy does not have the power to push the market toward environmental technologies. With clear carbon goals, investors could make long-term bets on our environmental future instead of continually hedging on the status quo.
As it stands, only a sixth of the top renewable energy manufacturers are from the United States. If the green revolution is the next step forward in technology, America risks being left behind. Personal commitment to the environment is not enough — we need a political movement to force the creation of environmentally minded laws and practices.
And not just for the traditional “green” reasons but also because it is financially smart and geopolitically strategic.
Conclusion
We are living in a world that is hot, flat, and crowded — and getting more so. The status quo is no longer an option in the Energy-Climate Era. Instead, we must look for ways to lead a green revolution — one that strengthens American economic competitiveness and increases national and global security by reducing dependence on petro-dictators.
Instead of being a “grasshopper generation” that devours wealth at the expense of the future, we have a chance to become the “re-generation.” Green is not just sympathetic; it is strategic, economic, and patriotic.
About the author
Thomas L. Friedman is a three-time Pulitzer Prize–winner and a weekly columnist for The New York Times, where he frequently writes on environmental issues, global trade, and the Middle East.
Thomas L. Friedman is an internationally renowned author, reporter, and columnist―the recipient of three Pulitzer Prizes and the author of five bestselling books, among them From Beirut to Jerusalem and The World Is Flat.
He was born in Minneapolis in 1953, and grew up in the middle-class Minneapolis suburb of St. Louis Park. He graduated from Brandeis University in 1975 with a degree in Mediterranean studies, attended St. Antony’s College, Oxford, on a Marshall Scholarship, and received an M.Phil. degree in modern Middle East studies from Oxford.
After three years with United Press International, he joined The New York Times, where he has worked ever since as a reporter, correspondent, bureau chief, and columnist. At the Times, he has won three Pulitzer Prizes: in 1983 for international reporting (from Lebanon), in 1988 for international reporting (from Israel), and in 2002 for his columns after the September 11th attacks.
Friedman’s first book, From Beirut to Jerusalem, won the National Book Award in 1989. His second book, The Lexus and the Olive Tree: Understanding Globalization (1999), won the Overseas Press Club Award for best book on foreign policy in 2000. In 2002 FSG published a collection of his Pulitzer Prize-winning columns, along with a diary he kept after 9/11, as Longitudes and Attitudes: Exploring the World After September 11. His fourth book, The World Is Flat: A Brief History of the Twenty-first Century (2005) became a #1 New York Times bestseller and received the inaugural Financial Times/Goldman Sachs Business Book of the Year Award in November 2005. A revised and expanded edition was published in hardcover in 2006 and in 2007. The World Is Flat has sold more than 4 million copies in thirty-seven languages.
In 2008 he brought out Hot, Flat, and Crowded, which was published in a revised edition a year later. His sixth book, That Used to Be Us: How America Fell Behind in the World It Invented and How We Can Come Back, co-written with Michael Mandelbaum, was published in September 2011.
Thomas L. Friedman lives in Bethesda, Maryland, with his family.
Genres
Public Policy, Politics, Environment, Science, Economics, Business, History, Sustainability, Climate Change, Industries, Environmental Policy, Political Economy, Environmental Economics
Table of Contents
Preface to the Release 2.0 Edition ix
Part I When the Market and Mother Nature Hit the Wall
1 Why Citibank, Iceland’s Banks, and the Ice Banks of Antarctica All Melted Down at the Same Time 3
2 Dumb As We Wanna Be 28
3 The Re-Generation 49
Part II Where We Are
4 Today’s Date: 1 E.C.E. Today’s Weather: Hot, Flat, and Crowded 63
5 Our Carbon Copies (or, Too Many Americans) 85
6 Fill ‘Er Up with Dictators 110
7 Global Weirding 146
8 The Age of Noah 180
9 Energy Poverty 194
10 Green Is the New Red, White, and Blue 210
Part III How We Move Forward
11 205 Easy Ways to Save the Earth 249
12 The Energy Internet: When It Meets ET 263
13 The Stone Age Didn’t End Because We Ran Out of Stones 288
14 If It Isn’t Boring, It Isn’t Green 320
15 A Million Noahs, a Million Arks 353
16 Outgreening al-Qaeda (or, Buy One, Get Four Free) 373
Part IV China
17 Can Red China Become Green China? 399
Part V America
18 China for a Day (but Not for Two) 429
19 A Democratic China, or a Banana Republic? 456
Acknowledgments 477
Index 485
Overview
In this brilliant, essential book, Pulitzer Prize-winning author Thomas L. Friedman speaks to America’s urgent need for national renewal and explains how a green revolution can bring about both a sustainable environment and a sustainable America.
Friedman explains how global warming, rapidly growing populations, and the expansion of the world’s middle class through globalization have produced a dangerously unstable planet—one that is “hot, flat, and crowded.” In this Release 2.0 edition, he also shows how the very habits that led us to ravage the natural world led to the meltdown of the financial markets and the Great Recession. The challenge of a sustainable way of life presents the United States with an opportunity not only to rebuild its economy, but to lead the world in radically innovating toward cleaner energy. And it could inspire Americans to something we haven’t seen in a long time—nation-building in America—by summoning the intelligence, creativity, and concern for the common good that are our greatest national resources.
Hot, Flat, and Crowded 2.0 is classic Thomas L. Friedman: fearless, incisive, forward-looking, and rich in surprising common sense about the challenge—and the promise—of the future.
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Thomas L. Friedman’s phenomenal number-one bestseller The World Is Flat has helped millions of readers to see the world in a new way. In his brilliant, essential new book, Friedman takes a fresh and provocative look at two of the biggest challenges we face today: America’s surprising loss of focus and national purpose since 9/11; and the global environmental crisis, which is affecting everything from food to fuel to forests. In this groundbreaking account of where we stand now, he shows us how the solutions to these two big problems are linked–how we can restore the world and revive America at the same time.
Friedman explains how global warming, rapidly growing populations, and the astonishing expansion of the world’s middle class through globalization have produced a planet that is “hot, flat, and crowded.” Already the earth is being affected in ways that threaten to make it dangerously unstable. In just a few years, it will be too late to fix things–unless the United States steps up now and takes the lead in a worldwide effort to replace our wasteful, inefficient energy practices with a strategy for clean energy, energy efficiency, and conservation that Friedman calls Code Green.
This is a great challenge, Friedman explains, but also a great opportunity, and one that America cannot afford to miss. Not only is American leadership the key to the healing of the earth; it is also our best strategy for the renewal of America.
In vivid, entertaining chapters, Friedman makes it clear that the green revolution we need is like no revolution the world has seen. It will be the biggest innovation project in American history; it will be hard, not easy; and it will change everything from what you put into your car to what you see on your electric bill. But the payoff for America will be more than just cleaner air. It will inspire Americans to something we haven’t seen in a long time–nation-building in America–by summoning the intelligence, creativity, boldness, and concern for the common good that are our nation’s greatest natural resources.
Hot, Flat, and Crowded is classic Thomas L. Friedman: fearless, incisive, forward-looking, and rich in surprising common sense about the challenge–and the promise–of the future.
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Pulitzer Prize-winning New York Times columnist Friedman (The World Is Flat) is still an unrepentant guru of globalism, despite the looming economic crisis attributable, in Friendman’s view, to the U.S. having become a “subprime nation that thinks it can just borrow its way to prosperity.” Friedman covers familiar territory (the need for alternate energy, conservation measures, recycling, energy efficiency, etc.) as a build-up to his main thesis: the U.S. market is the “most effective and prolific system for transformational innovation…. There is only one thing bigger than Mother Nature and that is Father Profit.” While he remains ostensibly a proponent of the free market, he does not flinch from using the government to create conditions favorable to investment, such as setting a “floor price for crude oil or gasoline,” and imposing a new gasoline tax ($5-$10 per gallon) in order to make investment in green technologies attractive to venture capitalists: “America needs an energy technology bubble just like the information technology bubble.” To make such draconian measures palatable, Friedman poses a national competition to “outgreen” China, modeled on Kennedy’s proposal to beat the Soviets to the moon, a race that required a country-wide mobilization comparable to the WWII war effort. Recognizing the looming threat of “petrodicatorship” and U.S. dependence on imported oil, this warning salvo presents a stirring and far-darker vision than Friedman’s earlier books.
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It’s hard not to admire Thomas Friedman’s reporting, even if it sometimes feels like a sales pitch. That’s why those who agree with Friedman’s analysis were excited about this book: it may not be the best volume available on the subject, but it will encourage millions of people to think about the central role climate change should play in the national discourse. But Bjøorn Lomborg, author of Cool It: The Skeptical Environmentalist’s Guide to Global Warming, wrote that Friedman exaggerates the impact of global warming, uses random research to support his argument, and completely fails to take economics into account when he proposes solutions. Eric Fisher, on the other hand, was so annoyed with Friedman’s drastic tone and predilection for coining sociological “laws” that his review skirted Friedman’s argument and mocked its form, which may represent the reaction of some of those seeking a more sophisticated take on this timely subject.
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*Starred Review* Three-time Pulitzer Prize winner Friedman mapped the level economic playing field created by digital technology and global free-market capitalism in The World Is Flat (2005). He now adds two crucial elements to his galvanizing analysis of the state of the world: climate change and the population explosion. We’re trapped in a catastrophic vicious circle: burning fossil fuels accelerates global warming as the human population increases and the global economy grows, so, too, does oil consumption. Add the malevolence of mega-rich “petrodictatorships” and America’s precipitous decline, and the need for change is urgent. Backed by flotillas of facts and observations gathered on his investigative journeys to the Middle East, China, India, and beyond, Friedman is lashing in his critique of America’s failure to face energy and climate realities. Yet his belief in America’s capacity for innovation inspires his call for “Code Green,” a concerted effort to take the lead in developing “clean power and energy-efficiency systems” and preserving the natural world. Fluent in business, politics, and science, Friedman cogently explains the complex challenges we face, reminds us of our adaptability, and defines environmentalism as the key to peace and democracy. Friedman’s big, passionate, and solidly specific ecological primer, social manifesto, and realistic plan for a green revolution aimed at restoring America’s greatness and securing a sustainable future should serve as a playbook for innovators and civic leaders. –Donna Seaman
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From The Washington Post’s Book World/washingtonpost.com Of course, rousing a full-bellied nation, groggy from decades of energy overconsumption, is no small task. As the current election debate reminds us, the United States has proven inept at developing a serious energy strategy. Our approach, says one expert quoted by Friedman, is “the sum of all lobbies”; we have energy politics rather than energy policy. In the aftermath of 9/11, George W. Bush ignored calls by Friedman and others for a “USA Patriot Tax” of $1 per gallon on gasoline. Instead, the president offered tax cuts and urged us to shop. Rather than stimulating the economy to move toward fuel-efficient vehicles and renewable energy, we became more dependent on China to finance our deficit and Saudi Arabia to fill our gas tanks. Americans wound up paying even more for gas in 2008, but we enabled OPEC to be the tax collector instead of using the revenues ourselves. Friedman calls this a “No Mullah Left Behind” policy and quotes former CIA director Jim Woolsey: “We are funding the rope for the hanging of ourselves.” Friedman believes we need to become “green hawks,” turning conservation and cleaner energy into a winning strategy in many different arenas, including the military. (“Nothing,” he writes, “will make you a believer in distributed solar power faster than having responsibility for trucking fuel across Iraq.”) We should stop defining our current era as “post-Cold War,” he says, and see it as an “Energy-Climate Era” marked by five major problems: growing demand for scarcer supplies, massive transfer of wealth to petrodictators, disruptive climate change, poor have-nots falling behind, and an accelerating loss of bio-diversity. A green strategy is not simply about generating electric power, it is a new way of generating national power. Incremental change will not be enough. The three-time Pulitzer Prize-winning writer for the New York Times scoffs at the kind of magazine articles that list “205 Easy Ways to Save the Earth.” In the 1990s, global carbon dioxide emissions rose 1.1 percent annually, and many nations (not including the United States) signed the Kyoto Protocol to try to curb those emissions. But from 2000 to 2006, growth in CO2 emissions tripled to 3 percent per year. Friedman cites an estimate by Royal Dutch Shell that it typically takes 25 years for a new form of energy to capture 1 percent of the world market. Shell predicts that if we do things right, renewable energy will provide 30 percent of global needs by 2050, but fossil fuels will still provide 55 percent. Friedman says we need to do better than that. “Carbon neutral” is not ambitious enough; companies and institutions should seek a “carbon advantage” over rivals. This will require innovations in clean energy; greater energy efficiency (including the use of information technology to create smart grids and smart buildings); and a new ethic of conservation. Friedman argues that rather than costing too much, such initiatives can create investment opportunities, new jobs and global leadership for the U.S. economy. Here one wishes he had provided more evidence from some of the pettifogging academic economists. Friedman is skeptical of treaties, and he argues that “a truly green America would be more valuable than fifty Kyoto Protocols. Emulation is always more effective than compulsion.” He makes a good case that “outgreening” other countries would contribute to America’s soft power as well as our hard power. “We are still the city on the hill for many Chinese,” he notes, “even though they hate what we’ve done at times at the top of the hill.” But the problem of China could overshadow what we do at home. In 2007, China surpassed the United States as the world’s leading emitter of carbon dioxide. Chinese argue that on a per capita basis each of their citizens is responsible for only one-fifth the emissions of an American, and that developing countries should not have to cut back until they reach rich countries’ CO2 levels. This is a formula for global disaster. As Friedman says, “Mother Nature isn’t into fair. All she knows is hard science and raw math.” China uses coal, a particularly CO2-intensive fuel, for 70 percent of its commercial energy supply, while coal accounts for a third of America’s total energy. China builds more than one new coal-fired power plant each week. Coal is cheap and widely available in China, which is important as the country scrambles for energy resources to keep its many energy-intensive industries running. But Friedman does not deal with the issue of cleaner coal in China, and no amount of renewable energy in America will solve the problem. At the rate China is growing, a Chinese switch to renewables will come too late. What can the United States do about this security threat? The bombs, bullets and embargos of traditional security policy are irrelevant. A 2007 report from the International Energy Agency urged a cooperative approach to helping China and India become more energy efficient. In other words, to promote our own security, the United States and other rich countries may have to forge a partnership with China, India and others to develop a full range of creative ideas, technologies and policies to prevent dangerous climate change. This requires a reframing of what we think of as national security and a more inclusive strategy than we have had in the past. If we finally move in that direction, Friedman will deserve some of the credit.
Review/Endorsements/Praise/Award
“Like it or not, we need Tom Friedman. …By and large [he] gets the big issues right.” ―The Washington Post Cover Review
“Required Reading” ―Business Week
“A compelling manifesto that deserves a wide reading, especially by members of Congress and candidates for President.” ―The Boston Globe
“New York Times columnist and globalization exponent Thomas Friedman pleads for Americans to wake up to the perils and opportunities of an emerging resource-strapped world. The author comes across as a blend of Will Rogers, Jack Welch and Norman Vincent Peale–a plain-spoken citizen outraged at the bullheadedness of U.S. politicians, yet optimistic about the power of ingenuity and finely crafted policy to avert disaster.” ―Newsweek
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CHAPTER 1
Why Citibank, Iceland’s Banks, and the Ice Banks of Antarctica All Melted Down at the Same Time
On June 15, 2005, as the global economy was booming, the satirical newspaper The Onion carried the following story about Chinese workers and all the stuff they make for Americans. Though a fake story, like many in The Onion it actually spoke some essential truths:
FENGHUA, CHINA — Chen Hsien, an employee of Fenghua Ningbo Plastic Works Ltd., a plastics factory that manufactures lightweight household items for Western markets, expressed his disbelief Monday over the “sheer amount of [crap] Americans will buy.”
“Often, when we’re assigned a new order for, say, ‘salad shooters,’ I will say to myself, ‘There’s no way that anyone will ever buy these,'” Chen said during his lunch break in an open-air courtyard. “One month later, we will receive an order for the same product, but three times the quantity. How can anyone have a need for such useless [crap]?”
Chen, 23, who has worked as an injection-mold operator at the factory since it opened in 1996, said he frequently asks himself these questions during his workweek, which exceeds 60 hours and earns him the equivalent of $21.
“I hear that Americans can buy anything they want, and I believe it, judging from the things I’ve made for them,” Chen said. “And I also hear that, when they no longer want an item, they simply throw it away. So wasteful and contemptible.”
Among the items that Chen has helped create are plastic-bag dispensers, microwave omelet cookers, glow-in-the-dark page magnifiers, Christmas-themed file baskets, animal-shaped contact-lens cases, and adhesive-backed wall hooks.
“Sometimes, an item the factory produces resembles nothing I’ve ever seen,” Chen said. “One time, we made something that looked like a ladle, but it had holes in its cup and a handle that bent down 90 degrees. The foreman told us that it was a soda-can holder for an automobile. If you are lucky enough to own a car, sit back and enjoy the journey. Save the soda beverage for later.”
Chen added: “A cup holder is not a necessary thing to own.”
Chen expressed similar confusion over the tens of thousands of pineapple corers, plastic eyeshades, toothpick dispensers, and dog pull-toys that he has helped manufacture.
“Why the demand for so many kitchen gadgets?” Chen said. “I can understand having a good wok, a rice cooker, a tea kettle, a hot plate, some utensils, good china, a teapot with a strainer, and maybe a thermos. But all these extra things — where do the Americans put them? How many times will you use a taco-shell holder? …” Chen added that many of the items break after only a few uses.
“None are built to last very long,” Chen said. “That is probably so the Americans can return to buy more …”
The Onion’s satire captured in caricature form the most important engine pulling up living standards across the planet for the last three decades — the intimate relationship between American consumers and Chinese savers and producers. At its core, the China-America growth engine worked like this: We in America built more and more stores, to sell more and more stuff, made in more and more Chinese factories, powered by more and more coal, and all those sales produced more dollars, which China used to buy more and more U.S. Treasury Bills, which allowed the Federal Reserve to extend more and more easy credit to more and more banks, consumers, and businesses so that more and more Americans could purchase more and more homes, and all those sales drove home prices higher and higher, which made more and more Americans feel like they had more and more money to buy more and more stuff made in more and more Chinese factories powered by more and more coal, which earned China more and more dollars to buy more and more T-bills to be recirculated back to America to create more and more credit so more and more people could build more and more stores and buy more and more homes …
This relationship, so critical in inflating the post–Cold War credit bubble, was so intimate that when Americans suddenly stopped buying and building in the fall of 2008, thousands of Chinese factories went dark and whole Chinese villages found themselves unemployed. Consider the Chinese artist colony Dafen, north of Hong Kong. Dafen’s roughly nine thousand art academy graduates have made the colony the world’s center for mass-produced artwork and knockoffs of masterpieces — the oil paintings that hang in motel rooms and starter homes across America. Some 60 percent of the world’s cheap oil paintings are produced within Dafen’s four square kilometers. “A reasonably skillful copy of Van Gogh’s ‘Sunflowers’ sells for $51,” Spiegel Online reported (August 23, 2006). “Buy 100 and the price goes down to $33 …The 100 paintings, guaranteed to have been produced by art academy graduates, ship within three weeks.” Not surprisingly, Dafen was devastated by the bursting of the U.S. credit bubble. “American property owners and hotels were usually the biggest consumers of Dafen’s works,” Zhou Xiaohong, deputy head of the Art Industry Association of Dafen, told Hong Kong’s Sunday Morning Post (December 14, 2008). “The more houses built in the United States, the more walls that needed our paintings.” And we in America sure did create a lot of new walls for a lot of Chinese watercolors. Overconsuming, overbuilding, overborrowing, and overlending all became the new normal during our post–Cold War credit bubble.
One of my favorite examples comes from my own hometown of Minneapolis. I was visiting there in the spring of 2009 and talking about the problem of runaway consumption with my childhood friend Ken Greer when he said to me, “There is something I have to show you.” We drove out to a small strip mall off Shady Oak Road and the Crosstown Highway. “OK, look at this,” Ken said as we turned in to the entrance. This “something” was hard to miss. On both sides of the entrance were Caribou Coffee shops, the Minnesota version of Starbucks.
How could one small strip mall need two Caribou Coffees?
We went into the one to the right of the entrance. I ordered my skim latte and asked the barista: “Explain something to me. You’re Caribou Coffee and there’s another one right over there. I can see it from here. Why are there two Caribou Coffees here less than a hundred yards apart?” Well, she explained, it was very simple. “There were long lines here every morning, so we needed another one.”
“I see,” I said to myself. Because people had to wait in line a little longer at rush hour in the morning, the Caribou Coffee folks couldn’t just add another coffee machine and a couple more baristas. They had to build a whole carbon copy coffee shop on the other side of the mall entrance. Hey, why not? Money was cheap, resources were available. Why not have two of the same coffee shop in the same strip mall …
With all due respect to Dafen and Caribou Coffee, I hope that we never return to the days of Americans just borrowing more and more money to buy more and more stuff with more and more credit fueling more and more Chinese factories or more and more coffee shops powered by more and more coal. Of course, I am not against global trade and economic growth, but our growth needs to be more balanced — economically and ecologically. We cannot just be the consumer and China the producer, and neither of us can allow the goods produced and consumed to be made or used in ways that harm the environment on the scale that we have been. This way of growing standards of living is simply unsustainable — economically unsustainable and ecologically unsustainable.
And that is why the Great Recession that began in 2008 was not your grandmother’s standard recession. This was not just a deep economic slowdown that we can recover from and then blithely go back to our old ways — with just a little less leverage, a little less risk, and a little more regulation. No, this Great Recession was something much more important. It was our warning heart attack.
Fortunately, it was not fatal. But we must not ignore what it told us: that we have been growing in a way that is not healthy for either our markets or our planet, for either our banks or our forests, for either our retailers or our rivers. The Great Recession was the moment when the Market and Mother Nature got together and said to the world’s major economies, starting with the United States and China: “This cannot continue. Enough is enough.”
Indeed. The way we were creating wealth had built up so many toxic assets in both the financial world and the natural world that by 2008/9 it shook the very foundations of our markets and ecosystems. That’s right, while they might not appear on the surface to have been related, the destabilization of both the Market and Mother Nature had the same root causes. That is why Bear Stearns and the polar bears both faced extinction at the same time. That is why Citibank, Iceland’s banks, and the ice banks of Antarctica all melted down at the same time. The same recklessness undermined all of them. I am talking about a broad breakdown in individual and institutional responsibility by key actors in both the natural world and the financial world — on top of a broad descent into dishonest accounting, which allowed individuals, banks, and investment firms to systematically conceal or underprice risks, privatize gains, and socialize losses without the general public grasping what was going on.
Of course, not all growth in America or elsewhere was fraudulent in these ways — far from it. We did improve productivity and create new companies, like Amazon.com and Google; new products, like the iPod and the iPhone; and new services, like online advertising and open source software, which collectively made people’s lives better, easier, more enjoyable, and more productive. But, in America at least, too much of our economic growth was borrowed from our children’s piggy banks and from Mother Nature’s reserves, not invented. Therefore, we as a society wound up living beyond our collective means.
It all lasted — until it didn’t. Or as my friend Rob Watson, the environmental consultant who founded EcoTech International, likes to say: “You know, if you jump off the top floor of an eighty-story building, you can actually feel like you’re flying for seventy-nine stories. It’s the sudden stop at the end that gets you.”
The Great Recession was our sudden stop. The question is: Can we learn from it? As the Stanford economist Paul Romer has said: “A crisis is a terrible thing to waste.” I believe we can learn from this crisis and we must learn from this crisis, and the purpose of this book is to provide one pathway for doing so.
This is a revised edition. The hardcover version of this book was first published in September 2008. In it, I argued that America had a problem and the world had a problem. America, I insisted, had “lost its groove” after the end of the Cold War and particularly after 9/11. We had turned inward and begun to export our fears more than our hopes, and we seemed intent on postponing dealing with every big problem weakening our society — from education to Social Security to health care to the deficit to immigration to energy. I argued that we needed to get back to nation-building at home — and I believe it was that sentiment, shared by a majority of Americans, that propelled Barack Obama to the presidency.
But the world also had a problem, I argued. It was getting hot (global warming), flat (the rise of high-consuming middle classes all over the world), and crowded (on track to adding roughly a billion people every thirteen years.) My thesis then, which remains my thesis here, is that America could get its groove back by taking the lead in developing the technologies and policy solutions to address the world’s biggest problems — the energy and environmental stresses growing out of a planet getting hot, flat, and crowded.
What has changed? The first thing that has changed is that America’s problems and the planet’s problems have become more acute. As noted above, the system of growth we have fallen into has destabilized both the Market and Mother Nature to a degree that can no longer be finessed or ignored. The collision of acute financial and ecological distress that made the Great Recession “great” enabled me to see something that was hiding in plain sight — that the problems destabilizing the Market and Mother Nature were rooted in the exact same kind of dishonest accounting, mispricing of risk, privatizing of gains, and socializing of losses.
So I have revised the opening three chapters to explain how and why the Market and Mother Nature hit a wall at the same time. After that, I pick up the narrative of the original book. The remainder of the first half looks at the impact that our reckless behavior has had on the planet, at a time when it is already becoming hot, flat, and crowded. The second half explains how we can use this crisis to reinvigorate and retool America, whose leadership — technological, financial, ethical, and ecological — will be vitally necessary for the whole planet to meet the unique challenges of this moment.
If I had to sum up what this challenging moment means to us, I would put it like this: Our parents were the Greatest Generation, building for us in America a world of freedom, abundance, and opportunity to a degree that no generation in history had ever enjoyed. My generation (I was born in 1953), the baby boomers, turned out to be the “Grasshopper Generation,” a term inspired by the writer Kurt Andersen, who in a Time essay devoted to our recent age of excess (March 26, 2009) argued that Americans in the past thirty years let out our inner “grasshopper” and gorged on the savings and natural world that had been bequeathed to us — leaving our children huge financial and ecological deficits. We cannot afford to be grasshoppers any longer. And therefore we and our children are going to have to be the “Re-Generation,” and summon the will, energy, focus, and innovative prowess to regenerate, renew, and reinvent America in a way that will show the world a new model for growing standards of living and interacting with nature that is truly sustainable, renewable, healthy, safe, fair, and creative of more opportunities for more people in more places than ever before.
The green revolution is not about the whales anymore. And it is not about “our children’s children,” a generation so distant it is really hard to get energized about it. This is about us. This is about the world we and our children will inhabit for the rest of our lives and whether we can find a way to create wealth — because everyone wants to live better — without creating toxic assets in the financial world or the natural world that overwhelm us. This is an urgent project, because the way of life we lapsed into in recent years cannot be passed on to another generation without catastrophic consequences. It is a tall order, a great challenge — one that our children did nothing to deserve but now can do nothing to escape.
As I said, the Market and Mother Nature hit the wall at the same time for basically the same core reasons, which we need to understand if we are going to avoid a repeat. I am going to focus on three: the systematic obscuring and underpricing of the true costs and risks of what we were doing; the pervasive application of the worst sort of business and ecological values, embodied by the catchphrase IBG/YBG — do whatever you like now, because “I’ll be gone” or “You’ll be gone” when the bill comes due; and the privatizing of gains and the socializing of losses.
Underpricing Risk
The meltdown that occurred in the market was triggered by subprime mortgages, which allowed people with low incomes and tarnished or no credit histories to buy homes. At the height of the subprime craze, one Los Angeles mortgage broker told me, mortgages were being handed out by banks and mortgage providers to anyone who could “fog up a knife.” People with incomes of $15,000 to $20,000, with no credit ratings, or in some cases without even a steady job or citizenship papers were granted mortgages to buy $300,000 and $400,000 homes — with nothing down. What is staggering is precisely how much we and others binged on these “subprime” mortgages, as though they were U.S. savings bonds, not hugely risky financial instruments. How did this happen?
(Continues…)
