Opinon: the unchallenged global free market

Although the ratification of the Lisbon Treaty, which completed the UK’s political union with the EU, is a change which significantly disenfranchised the electorate [in as far as political parties can no longer promise to introduce measures in a considerable number of areas without the consent of the Council of Europe] our surrender to the global free market and all that it entails occurred far less obviously and has had a much greater obvious impact.

The promise of this free market is that the whole of the world’s population can share in the affluence which has been, until now, the prerogative of the West. I pointed out in my article concerning the minimum wage that the seeking out of the cheapest labour by the global corporations has left a large slice of our unskilled and semi-skilled labour force facing an extremely uncertain future – this uncertainty is bound to effect other areas of the workforce as the under developed East are increasingly able to supply relatively cheap labour in the more skilled jobs, perhaps best demonstrated recently by VC’s declared desire to open up the UK to immigrants from India.

However, disregarding the impact of these almost certain changes, the very concept of the promise of the global free market is built on a fallacy, because the increasing affluence enjoyed by the West for the last 100 years was the result of a period when there were surpluses of easily obtained oil. We have now reached, or are about to reach ‘Peak Oil‘ the point in time when the maximum rate of global petroleum extraction is reached – this rate will be followed by terminal decline. This issue is well described in this short video interview with Robert Rapier.

Without this steady supply of easily reached oil the affluence of the west cannot even be maintained, let alone be spread to the less developed areas of the globe, because oil is the only product which can provide its basis, other forms of renewable energy cannot replace oil in many important areas. What affluence remains as oil production declines can only move away from the least competitive nations towards the most competitive – and the UK does not fall into this category.

Given this reduction in oil supplies, the obvious route is to conserve what remains so that it might be used where and when it is needed most, but the global capitalism relies on moving goods throughout the world from where they can be produced most cheaply to where they can be sold at the highest price at a time when production and use need to be as close together as possible – if oil is to be conserved.

Apart from transportation, the profit motive in capitalism demands that products have only a limited life. There is little value in making a car which will last fifty years with just minor maintenance, once those who want your car have one – you go out of business. In order to maximise profit it is necessary that the vehicle becomes redundant – motor manufacturers make vehicles which become no longer economic to repair after about ten years, regularly change styles so owners feel ‘out of date’ and keep introducing new ‘must have’ gizmos so that their newest product becomes irresistible – this means that redundant old vehicles are regularly scrapped and the energy [oil] originally required in production has gone to waste.

As Jeremy Clarkson frequently points out, the energy savings offered by new cars is negative when the energy required to produce these cars is taken into account – far better to keep an older car in service. This short-term redundancy approach is taken by all manufacturers of products in order to keep profits high.

Clearly whilst we are trapped in the global free market, the UK, whose oil production is low and whose untapped reserves are difficult to extract, will be at the mercy of these rapidly changing forces. Free of this market we would be able to manage all of our resources in a regularized fashion which would give our children and our children’s children a far greater degree of security even if we were obliged to accept a lower standard of living – which will be the end result whether we take these matters into our own hands or not.

The danger of remaining in the center of the turmoil of the free market is that we will have little or no say on where we end up, we will be at the mercy of forces which are too powerful to control by any UK government.

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33 Comments

  • Wow, there aren’t many articles that I disagree with as much as this one.

    The Council of Europe has nothing to do with the Lisbon Treaty, which in turn clearly increased democratic accountability through increasing power of the European Parliament rather than decreasing it. Peak oil is a nonsense, and it’s actually a global free market (not that one exists today, sadly), which is going to support our living standards by efficiently assigning resources…

  • John Roffey 18th Oct '10 - 2:27pm

    I am afraid the links I included in the article have been left out which makes parts nonsensical – I have asked for them to be restored.

    @ Joe Otten: If prior to the Lisbon Treaty issues which previously could be decided by Westminster must be referred to the EU for approval or disapproval the UK electorate has been disenfranchised [in the sense of deprived of power or influence].

    You will have noticed that the Party had to include policies in its manifesto where this was acknowledged.

  • John Roffey 18th Oct '10 - 2:31pm

    Thank you.

    The comment regarding the LT above should have been addressed to Peter – my apologies to both.

  • The biggest single transfer of powers from Westminster to the Eruopean Community (as it was then known) was the Single European Act, signed by Margaret Thatcher in 1986. Euro-sceptics wanting someone to blame need look no further..

  • Simon McGrath 18th Oct '10 - 5:57pm

    Even if this piece was correct which it clearly isn’t what are you suggesting we do? We are part of the world economy, if we put up trade barriers other would retaliAte.

  • John Roffey 18th Oct '10 - 6:37pm

    @ Sesenco

    I think you are aware that the LT completed the remaining parts of the European Treaty which the French and the Dutch rejected. It is political union and the creation of a single superstate that changed with the LT and with the further measures which come into force after five years, there will little or nothing which individual states will be able to be certain they can do which the EU will not have some interest and right to interfere. It is true that I believe the ratification of the LT was a big mistake which we will have cause to regret – particularly since it was against the clear will of the people.

    However, I raise the issue of the EU in connection to peak oil, because it stands clearly in the way of the UK enacting laws which fit the consequences of peak oil – primarily the conservation of reserves and stocks wherever possible – for example against producing consumer good with an unnecessarily short life span.

  • John Roffey 18th Oct '10 - 6:40pm

    @ Simon McGrath.

    I think if you take a look at our balance of trade you would accept that this would not necessarily be a bad thing.

  • @ Simon McGrath
    Posted 18th October 2010 at 5:57 pm

    “Even if this piece was correct which it clearly isn’t….”

    A very general statement, but no rebuttal of any point in the article is supplied.

    e.g.
    JR statement “VC’s declared desire to open up the UK to immigrants from India”
    Is this incorrect?

    JR Statement “is a change which significantly disenfranchised the electorate ”
    If the free trade deal with India goes through, will we, as a nation, be able to say no? Also, will we be able to refuse any Indian workers who wish to come here? If the answer to the former is no then surely he is correct. If the answer to the latter question in no, then by default the EU are setting immigration policy for EU Nations – which I thought still rested with said member states, so he would also be correct as something that is supposed to be within our remit has been removed.

    Whilst I may disagree with the overall gist of the article, I don’t think I’d say the WHOLE article is incorrect.

  • “we will be at the mercy of forces which are too powerful to control by any UK government.”

    If these forces are beyond the control of any UK government, it does not matter whether we surrender to them or not. (And how can you surrender to a free market? On the face of it, you might as well speak of surrendering to the weather.)

  • John Roffey,

    The direction of the European Union (as it now is) was determined by Costa v ENEL and Van Gend v Loos, two decisions of the European Court of Justice handed down in the mid-1960s and not even reported to the UK Parliament at the time that Britain acceded.

  • John Roffey 18th Oct '10 - 7:28pm

    @ Chris_sh

    I appreciate your limited support Chris – however, the implication of your reply is that you do not believe the serious threat that peak oil presents. The linked, short, video explains how other forms of energy are not a replacement for oil, which is vital if our current consumer lead lifestyle is to continue. Eventually, I am sure it will be realised that we must be weaned from our addiction to ‘getting and spending’, however if this is realised too late – we will be in an extremely difficult predicament, one that would be very difficult from which to escape.

  • John Roffey 18th Oct '10 - 7:34pm

    @ ad

    Out of the EU and the employment of some protective measures would take us to the edge of the storm rather than in the heart of it. Take a look at the Irish predicament and ask ‘what is stopping them from becoming a third world country?’.

  • John Roffey 18th Oct '10 - 7:42pm

    @ Sesenco

    Are you saying that the two cases you quote bound us as tightly, politically, to the EU as the LT – which is a self amending treaty, which means that the member nations of the Union will never need to ratify any EU legislation again – the EU can now do whatever it wants.

  • @John Roffey
    Posted 18th October 2010 at 7:28 pm
    “the implication of your reply is that you do not believe the serious threat that peak oil presents”
    It’s not so much that I disagree about the oil, but I admit I wasn’t actually clear so it could have been read as that. I think it was more the bit about being isolationist (which is the impression that I’m getting from the article).

    Also, do we actually have enough oil to meet our own needs, if not then we are still at the mercy of those outside forces.

  • John Roffey 18th Oct '10 - 8:15pm

    @ Chris_sh

    No, not presently because of the cost and risks in developing the North Sea. However, a decent trade deal with Canada, who have massive oil reserves, would solve that problem. In fact isolating the Commonwealth countries in a trade deal would supply most needs. It was always likely to be a battle with in the EU because it consists of a group of countries whose basic strengths are too similar.

  • I would have thought, JR, that the crisis of Peak Oil which is already affecting all of us in the world, would warrant greater political cooperation / integration between countries (both in Europe and beyond)?

  • @ Tim13

    Objectively – yes, but I think we have seen enough evidence that nation’s leaders, supported by their people, take actions which benefit themselves. As oil does steadily decrease in availability the price will steadily rise [which effectively benefits the oil producing nations at the expense of those who have to rely on imports]. Disregard for other nation’s difficulties is built into the [few] rules which govern the global market and, as far as I know, the same condition applies within the EU.

  • david thorpe 19th Oct '10 - 1:30am

    there is an interesting debate to be had abotu whether the EU is about free markets or cartels.
    I mean sure you can trade freely with each other member, but non members have significant disadvantages, and that may constitute a cartel.
    The global market isnt fre, only certain parts of it are.

  • John Roffey 19th Oct '10 - 7:58am

    @ david thorpe

    I am sure there are many cartels in operation which function for the benefit of the members – it seems to me that the banks are the most likely. Now we have so few banks in the UK the possibility of a cartel operating here is greatly increased.

    One apparently unexplained phenomenon is the continuing concern that it is very hard for small and medium sized businesses to obtain loans, even on apparently secure developments yet there appears to be plenty of cash about for credit card spending. This might be explained by the fact that credit cards debts are charged at 16% upwards whilst those with savings get half of 1% on their deposits, also the apparent freedom the banks have to load charges on their customers for minor infringements of their CC agreements. This also might explain why virtually every nation-wide company is continually bombarding their customers with offers of credit cards – a business that can return at least a 3200% on borrowed money is indeed a fabulous investment. More worrying is the banks willingness to lend money to those who are ‘buying to rent’ rather than those ‘buying to own’.

  • If we take what is essentially a defeatist and isolationist view (come out of international blocs, whether it be the EU or whatever), it seems to me we are pulling up the duvet cover and hoping the outside world will go away. That happened between the World Wars when times got tough economically – the League of Nations was marginalised by strong countries, and look where it landed us then. We are, genuinely, all in this together. As Liberals and Lib Dems, our principles are about internationalism and working together. We cannot just give up on it because times are hard.

    In the end, and especially now, when the world’s population is so much higher than, say, 1939, the world’s resources, including oil, are under unprecedented pressure, and we are even more interdependent, we cannot hide, we have to negotiate, and more important, we have to agree. Situations like the environmental conference at Copenhagen last year and the Doha trade round, where we end with no agreement, cannot be allowed to continue. None of us can sit on our own advantages and refuse to share – the politics of the nursery school can’t go on. Or massive suffering everywhere will result.

  • John Roffey 19th Oct '10 - 8:30am

    @ Oranjepan

    Thanks for your very considered reply to the issues raised in my article. I confess to oversimplifying the forces in operation, this was deliberate to a fair extent as it is not easy to see them as a whole. However, I cannot agree that ‘freeing up markets’ and technological developments would resolve the problem. Oil deposits are owned by specific nations and contracted to giant oil corporations and as this resource becomes scarcer, all the lessons of history indicate that those nations [or the oil companies] will use this scarcity for their own [or perhaps their leader’s own] benefit.

    Essentially, if the case made by Robert Rapier in the video is broadly correct, the price of oil is set to rise over the coming years to previously unknown levels – and we all know the impact this has already had on our fuel bills. Serious and continuing price hikes would have a damaging effect on more and more household budgets – not to mention the impact on simply owning and using a car.

    As you say there are plenty of deposits of oil about which are more difficult to extract, but will become viable as the price increases. However this does translate to ever increasing fuel prices and it should be kept in mind that we are using the equivalent of oil that has taken 400 years to form, each day – so, unless we make strenuous efforts to reduce our consumption, a very dark day lies ahead. Those nations which prepare early for this day are those who will be able to come through relatively unscathed and short lived consumer items is an obvious point of attack.

    As we have seen the nigh impossible predicament the Party’s MPs have found themselves in, the pressures on them [as would be the case for any government] by the various spending departments will not be easily resolved by the Star Chamber. It already seems that the coalition is veering towards less stringent cuts on the basis that once their other measures freeing up businesses come into force, the nations economy will improve markedly and such austerity will not be required. The problems that Peak Oil presents does not auger well for such confidence for a nation trading in the global market place.

    One of the key problems is that government ministers and the political class generally are not likely to face long-term unemployment with restricted benefits if their plans fail and they are removed from office [Blair/Brown have and will benefit markedly from their terms]. This is why in my two earlier articles I have promoted the case for Direct Democracy, which would give those who will suffer the consequences mostly of failure a right to be gradually included in the decision making process [and would give the L/D MPs an impeccable point of reference for their decisions – their constituents] and advocated the scrapping of the minimum wage [with safeguards for those on the lowest wage] – to avoid considerable numbers having to face the misery of long-term unemployment and the consequential reduction of imports which will help to help balance trade.

    https://www.libdemvoice.org/author/john-roffey/

  • John Roffey 19th Oct '10 - 9:03am

    @ Tim13

    I think my answer to Orangepan covers the main thrust of your post, and I can only repeat that I do not believe fairness and global considerations will be the basis of the decisions made by those who own/operate oil reserves.

    I am not advocating removing ourselves from the global market place, but removing ourselves from the center and closer to the edges away from the heart of the hurricane. Also to provide ourselves with the greatest maneuverability possible by escaping from those international agreements which most contain our freedom of action.

  • david thorpe 19th Oct '10 - 6:41pm

    the banks are probably a cartel as are probbaly the big four accountancy firms and big law firms, vince cable has pointed that out

  • John Roffey 19th Oct '10 - 9:21pm

    @ Orangepan

    I must admit I admire your optimism, clearly you are convinced of your case so there is probably little value in continuing with the debate as fixed points have been reached – time will tell. However, I do not have the faith in human nature that you do – if liberals were the owners of the main oil reserves, perhaps things would be different, but that is not the case.

  • JR and Oranjepan
    The views I have expressed (including on other threads) reflect what I think is the world we are moving into, ie a “smaller” more interdependent world. I fully supported globalisation, but not the distorted, one-sided version we have now, of all the benefits being on the side of capital, which has the resources and the clout to go wherever it likes, to a large extent, do what it likes. As the larger and early developing industrial countries showed, they had to use muscle against unrestrained capitalists, and in their different ways, that is what they did. What I am saying is that we must, in the new world develop international systems for regulation taxation, and ultimately control of international capital. This, of course, is why the likes of Murdoch preaches relentlessly against political movements showing any sign of going near that hot potato!

    With our internationalism, that is the road the Lib Dems should be looking at (sorry we have already looked extensively and regularly through policy papers at it). There could be all sorts of mechanisms to achieve it, but I think it is the ultimate in pessimism to believe “it won’t happen” so we shouldn’t try. I am not sure, JR, whether it is even possible to “move ourselves away from the heart of the hurricane” – actually I think USA and China are at the heart, but all countries are now hugely influenced by international events.

    Summing up, I want to take the optimistic road of successful negotiation, not the head in sand road leading to ever increasing inequality and/or massive war and total destruction of the Earth. Countries, and people must be brought to realise that agreements must be reached, or we will all suffer (I suppose this statement equates to acceptance of game theory?)

  • @ Oranjepan & Tim

    I don’t believe it is possible to legislate against greed and the power of the forces currently at the center are too great to be controlled by international agreements. In previous times these matters would have been settled by war, but the advancement in weapons development has made this route no longer feasible [not that I am recommending it!]. Perhaps cyber war is the future.

    In Eastern philosophy it is generally accepted that, for societies to function well, rank needs to correspond to inner worth – perhaps the best, most recent, example of this was the last King of Bhutan, the one with the Ministry of Happiness, whose ministers job was to travel to the four corners of the land to find out if the citizens were happy and if not what was preventing it so that action could be taken. A very simple form, but instructive.

    As T says, rank corresponds too often to wealth and Murdoch is the perfect example with the influence he has and does wield over British and other governments – often described as the 23rd Cabinet Member. The changes in out society which have reduced it to its current level were instigated by Thatcher, a grocers daughter, who certainly did believe that ‘greed is good’ – you have to if you are a merchant of any kind. If memory serves, of the 4 levels in society recommended by Plato, merchants were ranked third – so perhaps he agreed with the philosophers of the East. Whilst power is in the hands of merchants – the desired improvements will not be forthcoming.

    I do believe that the Commonwealth would have a better chance of creating a more healthy business environment if the members were our trading partners – there is an underlying ‘family’ concept written into its formation.

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