January 31, 2005
Snow Business III
A terrific piece of journalism today in a small town paper, the Hood River News. It's a close look at the economic impacts of this season's anemic snowfall, a subject we've been following this winter. The article puts some hard numbers to the story of shuttered ski areas in Hood River County, Oregon.
Here's a look at Mt. Hood Meadows Ski Resort (which is just one of many struggling ski areas in the Northwest). By the numbers:
Employees, January 2004: 1000-plus
Employees, January 2005: 47
Payroll, typical year: $4.5 million
Payroll, this year: $1.5 million
Ski visitors last year: 350,000
Ski visitors this year: 76,000
Without skiers, receipts shrink for eateries, hotels, and even beer-makers. The losses add up, especially when you multiply the effects by the dozen or so ski resorts along the Cascades. Sadly, the consequences for rural ag-dependent counties like Hood River may be more serious than lost ski revenue. Low snowpack in the winter means less water in the summer for economic staples like apples, cherries, and pears.
Last week was predicted to bring new snow and a chance for late-season re-openings, but the weather forecasts were wrong. At the moment, it's 39 degrees at the Summit at Snoqualmie, which will likely stay shuttered until next winter. At Mt. Hood, the National Weather Service is currently predicting highs into the mid- and upper-40s for the rest of the week.
Liter of the Pack
I didn't know this: in Canada, automobile fuel economy is expressed as gallons per mile, not miles per gallon as it is in the U.S. (Well, really, it's liters per hundred kilometers, but if you're south of the 49th parallel and a metric-system-phobe, gallons per mile is essentially the same thing.)
Now, I don't mention this just to expose my lack of cultural knowledge of my northern neighbors. I mention it because it seems to me that liters-per-kilometer is a much better way of expressing the fuel efficiency of autos.
As I mentioned before, miles-per-gallon math is quirky, and has all sorts of unexpected and counterintuitive consequences.
Among them: a seemingly huge upgrade in fuel economy (say, trading a Camry for a Prius, which doubles your fuel efficiency from 30 mpg to 60 mpg) can have the same fuel-saving consequences as seemingly smaller improvements among larger vehicles (say, trading a 15-mpg SUV for one that gets 20 mpg).
Using miles per gallon, that fact just seems strange -- how can the huge jump from 30 mpg to 60 possibly have the same effect as the much smaller shift from 15 mpg to 20?
But if you use the Canadian method, there's nothing counterintuitive or confusing. Shifting from a car that burns 4 gallons every 60 miles (i.e., 15mpg) to one that burns 3 gallons over the same distance (20 mpg) saves 1 gallon of gas every 60 miles: 4-3=1. Likewise, shifting from a car that burns 2 gallons per 60 miles (i.e., 30 mpg) to one that burns 1 gallon (60 mpg) saves 1 gallon over the same distance: 2-1=1. The math is much clearer, and any apparent "paradox" disappears.
Canadian fuel efficiency figures also makes it easier to tally the cost of fuel. With gas at $1 per liter, say, an 8 liter/100km vehicle costs $2 extra bucks every 100 km driven, vs. a vehicle that gets 6 liter/100km. So if you're buying two cars, you may not even need to pull out a calculator to figure out how much the more efficient car will save you each year.
So I wonder how many Americans chose big, inefficient SUVs thinking (incorrectly) that there wasn't such a big difference between 15 mpg and 20 mpg. I don't know if using Canadian fuel economy math would have made their choices any different. But at a minimum, the cost consequences of their choice would have been a little clearer.
(Thanks to Jeremy Brown of canstats.org for the heads up about this.)
Who Wants to be a Responsible Millionaire?
It’s hard to feel sorry for Jeff Reifman—he’s a former Microsoftie who, for lack of better information on investment choices, was forced to agonize about the most socially responsible way to salt away his millions. But his recent Seattle Weekly article is a useful primer for those struggling with synching their money decisions and their values. Because, as Reifman points out, it’s pretty darn confusing.
He explains the various ways that socially responsible investment (SRI) firms choose their investments and the compromises they make (“there’s no such thing as a perfect company,” says one manager); and gives pointers on investment depending on how much change you’ve got—and what kind of change you want to see. A surprise to me was that some SRI companies actively work with corporations to improve their behavior, providing even more “change” value per dollar invested.
SRI funds do have weaknesses (notably, diversification), but over the long-term they might be even be more profitable than traditional funds--see this news bit on the Winslow Green Growth fund--because they hold companies with fewer long-term liabilities.
The theory of SRI funds is that these are corporations that minimize behavior that can negatively impact their businesses, so they are less vulnerable to loss due to environmental degradation, increased regulation, or litigation. For example, a logging company that doesn't plan to mitigate its impact on the environment might later get sued for causing soil erosion and flooding—or it might run out of trees.
P.S.: Northwest institutions highlighted are ShoreBank Pacific (a Portland-based community bank), SRI firm Portfolio 21, and Cascadia Revolving Fund, which loans to “underserved entrepreneurs, small businesses, and community-building organizations.” And the Social Investment Forum is a good general resource on SRI.
Clean Energy Central
For me, the highlight of the weekend’s news was Matthew Preusch’s Sunday Oregonian article on central Oregon’s renewable energy industry.
. . . a private-public group called the Business Alliance for Sustainable Energy that launched an effort last week to promote the 65 Central Oregon companies working with renewable power or energy efficiency in a nine-county area east of the Cascades between the Columbia River and California.
The companies already employ more than 200 people and generate more than $20 million in sales annually . . . . The group hopes to increase those sales figures at least 30-fold and multiply the number of jobs by 20 over the next 10 years.
January 28, 2005
If You Only Read One Article Today...
...read this one, from the Vancouver Sun.
According to the story, panelists at a forum on the future of the BC forest sector warned that the industry is completely unprepared for the long-term effects of globalization. With the emergence of a worldwide timber market, BC is now competing against dozens of new rivals, ranging from New Zealand to Malaysia to South America to Europe. And cutthroat competition among suppliers means one thing for timber prices: they're going down, down, down.
The upshot -- industry analysts predict that the extreme market competition in years to come will make the pressure of the 1980s and 1990s look 'tame by comparison'. That doesn't bode well for BC, since its timber companies are only about half as profitable as those from other parts of the globe.
To add to the BC timber industry's woes, the worldwide demand for timber may be artificially high right now, as a global real estate boom (worldwide, property values are up an astonishing 33 percent in three years) has fuelled homebuilding in the US and elsewhere. But booms can quickly turn to busts, and if the red-hot US real estate market turns out to be just a bubble, the biggest market for BC timber could dry up.
Low prices will mean that timber companies will have to radically squeeze costs -- which typically means replacing people with productivity-enhancing machines. But if the history of the US Northwest's timber wars in the late 1990s is any guide, we should expect the BC industry to turn to blame someone else -- either the government or environmentalists -- for the job losses.
In the end, pinning your economy to low-priced commodities in a global market is a sucker's game. So if you start hearing stories about how BC's (still lax) environmental regulations are responsible for thousands of timber job losses, and a decline in BC's competitive advantage in forest products, don't get suckered yourself.
Where There's No Snow, There's Fire?
The money quote:
"So far this winter, Kaiser said, things are shaping up comparably to 1988 and 2001, both low-snow years that preceded summers filled with wildfire."
Let's hope they start getting some more snow.
HOT enough?The Washington Legislature seems poised to launch Cascadia's first HOT lane -- a high occupancy/toll lane, as the Seattle Post-Intelligencer reports. Let's hope this step leads to far more pricing of roads.
January 27, 2005
Today, another article on our region's snow gone AWOL, this one in the Seattle Times. According to Philip Mote, a climate scientist at the University of Washington who is interviewed in the article, most basins in the Cascades are carrying just 20 to 30 percent of their average snowpack, the worst in 28 years. (Precipitation is down by only 20 to 30 percent, but warm winter temperatures have melted the snow.)
In the Northwest, a season of minimal snow can have serious ecological and economic consequences. So far, the media has paid a lot of attention to the ski industry, which is suffering through a truly awful year. But unless the snow situation reverses dramatically in the late-season, we'll soon be hearing a lot about salmon, farmers, and electricity too.
A bad year for snowpack is unfortunate, but not cause for alarm. Not, that is, unless the best scientific predictions point to a future of greatly diminished snowpacks and streamflows as a result of global climate change. And they do.
But is this year's lousy ski season really the consequence of global warming? Or is it just a natural weather pattern like El Nino, the Pineapple Express, or the Pacific Decadal Oscillation?
First, let me state this unequivocally: no one can ever say that weather, no matter how bizarre or alarming, is definitely caused by climate change. It is--in principle--impossible to determine that a single weather event is evidence of global warming (or evidence against it, for that matter). This winter's abysmal snowpack in the Cascades does not "prove" climate change is happening, just as normal weather conditions do not "prove" that the climate is stable.
Weather cannot prove that climate change is real, but the science can. And the overwhelming consensus among scientists is that the planet is getting warmer and human activities are a primary cause. (If you're a global warming skeptic, see my postscript.)
But, as I implied earlier, scientific understanding of climate change is not confined to documenting changes in the earth's atmosphere and oceans. Scientists are now able to make predictions about future climate trends with increasing accuracy and regional specificity. And researchers expect that if present trends continue, in 50 years Cascade snowpack will be about half of what it is now in a typical year. In fact, some climatologists believe that human-induced global warming may actually alter the frequency and intensity of weather patterns such as the Pineapple Express that's melting our snow this winter.
So there are at least two ways of understanding our nonexistent ski season: 1) It fits scientific climate predictions and anecdotally suggests that global warming is coming home to roost; 2) Whether or not it has anything to do with climate change, it is precisely the type of condition that scientists predict, and it is therefore an instructive sneak preview of future climatic conditions.
But what can we do? Is there any way we can halt something as massive and global as climate change? Well, the obstacles are daunting and the odds are long. But we need not despair. In a later post (tomorrow, I hope) I'll explore some of the ways that Northwest leaders are forging innovative solutions to our climate predicament.
Postscript: As I mentioned, the scientific consensus that human-induced climate change is real is simply overwhelming, despite the oddly persistent myth that there's a legitimate scientific debate over the issue. (There's plenty of debate about the details of climate change--how much, how soon, where, and why--but very little about the basics: the earth is getting warmer and human activites are a main cause.) Global warming skeptics can take up the issue with the US Environmental Protection Agency, the National Academy of Science, the Intergovernmental Panel on Climate Change (comprised of 2,500 of the world's leading climate scientists), the US State Department, the US National Oceanic and Atmospheric Administration, the US Department of Agriculture, British Petroleum, and the United Nations, as well as university researchers, international government agencies, and corporations far too numerous to mention here.
January 26, 2005
Today's top tragedy
Top story on the New York Times website all day today is carnage--the tragic helicopter crash in Iraq that killed 31 Americans and the tragic train smashup in California that killed at least 10.
But here's an even bigger tragedy: on average, in the United States, 116 people die from motor vehicle crashes every single day. Auto accidents are the leading cause of death at every age from 4 to 33.
The media gravitates toward big-bang stories like trains or helicopters crashing, but largely ignores the steady grind: The dull but far more important story of more than 41,000 Americans killed by cars in a single year.
BC's Resource (In)dependence?
Editor's note: We asked Thomas Michael Power, Chairman of the University of Montana's Economics Department, to comment on a new report by BC's Urban Futures arguing that the province's primary economic engine is its natural resource exports. Power disagrees--and argues that true economic development has little to do with exports and everything to do with creating a web of local economic relationships.
Two and a half centuries ago, early economists in France postulated that all wealth springs from the earth: farming, timber harvest, mining, and fishing were the sole sources of value, value that then circulated throughout the rest of the economy. It was not a coincidence that the ruling landed gentry who controlled the dominant resource, agricultural land, supported this theory. In England, at about the same time, a different theory dominated: All wealth results from exports that bring in the outside income that circulates through the economy. It was not a coincidence that the rising commercial trading class strongly supported that theory.
Economics as we know it, starting with Adam Smith, developed as a critical attack on such self-serving narrow conceptions of the “origins of the wealth of nations.” But two and a half centuries later we still have self-interested parties flogging these theories rather than treating them as long discredited and abandoned historical curiosities. The Urban Futures, Inc. consulting group’s “Regions and Resources: The Foundations of British Columbia’s Economic Base” (article here; pdf of executive summary here); is the latest example.
The report argues that the BC economy continues to be almost exclusively dependent on natural resource industries operating in the rural areas of British Columbia. The greater-Vancouver metropolitan economy is simply an avaricious parasite living off the wealth generated by the hardworking folks in the hinter land.
This view of the BC economy is not based on analysis or data but on a simple assumption: All income and consumption and, therefore, well-being in BC is totally dependent on the income generated by BC exports to the rest of the world. There is no other source of economic activity and well-being except the income injected into BC by those exports.
This is clearly a false assumption. If it were true, no economic activity would be taking place on our entire planet since we have yet to enter into trade relationships with other worlds. In the economic history of our planet, we have never made a commercial transaction with extraterrestrials. According to this study, then, there must be no economic activity taking place on Earth. Yet, despite the planet’s failure to commercially export anything, the world’s economy has been expanding at a brisk pace for decades, even centuries.
Let me make a blunt economic assertion: The function of exports is not to “bring money into the economy” to support internal economic activity. Exports have only one function: to pay for the importation of goods and services that we do not produce ourselves. The more self-sufficient our economy is, the less we need exports.
Exports involve combining our work-effort with our savings and the local gifts of nature to produce valuable goods and services that we then send away for other folks to enjoy. How could that improve our well-being? In return we get colorful pieces of paper printed in other countries which are called “money” or, if we are really old-fashioned, a soft yellow metal called gold that we then put in an underground vault somewhere.
How could either of those improve our well-being? There is only one way: We use those foreign-printed colorful pieces of paper or that soft yellow metal to buy from other countries what we cannot easily produce ourselves. Those imports do improve our well-being since they give us access to something that we otherwise would have to go without or produce at a higher cost. So it is the imports, not the exports, that improve our well-being. The exports are a way of paying for the imports.
This is the reverse of the two and a half century old mercantilist theory that Urban Futures Inc. is trying to sell us. We only need exports to cover the cost of our imports and we only need imports to the extent we cannot produce certain things ourselves. Most of our economic activity does not fall into either category.
Where would we get the money that currently circulates within our economy if it were not for exports? The same place we get it now: The government and the banking system would simply create it! Money is, after all, simply colorful pieces of paper, jingling coins, or accounting entries at a bank. Money is a medium of exchange that facilitates internal economic exchange so that we do not have to do all of our trade in barter terms. It is possible to have a totally self-sufficient economy with an elaborately sophisticated economy with extensive specialization and division of labor all facilitated by an internal money supply. The US economy for a good part of its history fit that description, with little more than about 5 percent of its total economic activity associated with international trade. That did not hobble American economic growth.
True economic development does not involve more and more extensive dependence on exports. True economic development consists of weaving a local web of increasingly sophisticated economic interdependencies that create more and more niches for economic actors to deploy their skills and resources in satisfying an increasing range of their fellow citizens’ needs and desires. That increasingly sophisticated web of local economic relationships creates economic opportunity while capturing and holding more and more of the money that circulates within the local economy. This is not a new theory. It was basis of Adam Smith’s Wealth of Nations: The increasing specialization and division of labor.
That, of course, is what the greater-Vancouver economy is all about. It is also that type of diversification that has brought relative prosperity and stability to much of southern BC as the natural resource industries have provided a continuously shrinking fraction of total jobs.
Less than 10 percent of total BC employment is in the natural resource sectors. Is an economic assumption that tells us that 90 percent the Province’s jobs and 85 percent of its production are irrelevant a reasonable way to approach public economic policy? Does an economic assumption that urges the Province’s rural areas to focus exclusively on natural resource extraction with its accompanying dependency, instability and environmental disruption lay out a safe path for sustainable rural development? I think not!