City of the Future

When Giants Fall: Review

Like his previous work, Financial Armageddon, Michael J. Panzner’s When Giants Fall provides a brief but surprisingly comprehensive picture of our unfolding economic catastrophe.

It’s also a curious book, not easy to categorize. Panzner perspective is that of long-time veteran of stock, bond and currency markets, but he is wise enough to see that one can’t describe the financial mechanisms of the meltdown without looking deeply at the political, social and individual ramifications of what is going on. To put it another way, if you’re looking for quick investments tips on (as Panzner himself joked in a recent interview) “how to make a killing in a world gone to hell” you’ve come to the wrong place.

In fact, in spite of the quote on the book jacket which reads “for those enlightened few who understand what is really going on and what will likely happen next, the chaotic years ahead may well represent a singular opportunity” the book itself provides no such easy answers. There are many suggestions of what to avoid: stocks, bonds, most real estate. But as to what will do well at any given point, the only good answer is likely to be: “it depends.”

At the heart of the book is the observation that for myriad reasons the United States is rapidly losing its place as the world singular superpower—from resource constraints to debt at all levels, to a collapsing dollar. This doesn’t mean that competitors like Russia and China will have an easy go of things. “While the United States may be the main loser, it won’t be alone,” Panzner writes. “The rest of the world will also be wracked by what is likely to be a long and debilitating malaise.”

Unlike some financial doomsayers, Panzer grasps the implications of resource limits to growth as well. While he is agnostic about the idea of a near-term peak in oil, he recognizes growing demand for oil in the developing world will very likely suck up any new capacity that could come on line.

This is not a small distinction; differing scenarios for the rate and timing of global oil decline versus the simple inability to keep up with demand make for drastically different outcomes. But Panzner is right to be cautious about predictions.

It seems increasingly clear that we have entered an era when the predictions—even of those who were correct up to now—are diverging. The problem is that even for those of us who understand the broad outlines of what is happening, getting the ever-crucial details right in the moment will continue to prove challenging if not impossible.

In that sense, When Giants Fall is a highly enlightening portrait of how things may fall out, and an invaluable tool for scenario planning. Does it have all the answers? Of course not; nobody does.

Two Augusts

When the producers of the new movie August arranged to promote the film by having director Austin Chick and lead actor Josh Hartnett ring the closing bell on the New York Stock Exchange last Friday, it’s doubtful they had any idea what they were in for—but the irony couldn’t have been more dramatic, as Steve Zeitchik at the Hollywood Reporter recently pointed out.

August, a film about the demise of a fictional dot com company called Landshark in August of 2001, approaches its subject as a historical set piece—a portrait of a bygone time when foolish 20-somethings ruled (or pretended to rule) the world with papier-mâché companies that produced nothing of any real worth. The unspoken implication of that approach is that everything changed, especially after September 11, 2001. (In the film, the symbolic weight of that August was pounded in through periodic background shots of the still-standing twin towers, an effect the filmmakers probably thought was subtle.)

But by the time Hartnett and Chick rang that final bell, it looked like the stock market and the economy at large was in a free-fall far worse and more widespread than the one that hit Internet companies in 2000-2001. After all, the collapse of IndyMac and the possible insolvency of Fannie Mae and Freddie Mac signify something far more severe than any number of “Landshark” failures. In 2001 Internet companies collapsed en masse but for the most part alone; one did not necessarily directly affect another.

The home mortgage crisis was another matter entirely—many, many more people have mortgages than ever owned stock in Pets.com. More significantly, the financial instruments derived from bad mortgages were treated by financial players not as the garbage they were but as the safest investments in the world, which means that everything from pension funds to municipalities across the world had exposure. Regarding the idea of real worth, there was never any value more hallucinated than the absurd prices of houses at the peak of the bubble.

What is not widely appreciated is the way in which the events of 2001 and the present are intimately connected. In truth, the crash depicted in August was not really the end of an era, but just a chapter in a much bigger story—a story whose plot revolves around a decades long economic transformation from a society in which wealth consisted of concrete goods and services that people accumulated through savings and production, to one in which money and debt were created out of thin air. The problem is that hallucinations fade and people must still eat and wear clothes.

At the climax of the movie, we finally see Landshark’s chastened CEO going to a meeting with a buyout firm that represents “old money”—headed by a banker played by the inimitable David Bowie. The implication of the scene is that the “grownups” were now back in charge.

But the fact is that investment banks were the generators of the dot com mess. They underwrote the IPOs, after all, providing not only financial but moral support to the arrogant young geeks who thought their code was worth more than the GNP of many small nations. When it was over, companies like Bear Stearns washed their hands and reinstated their formal dress-codes, as if they were above it all.

Now we see they weren’t, of course; and the imbalances and fantasies that were at the root of the Internet bubble didn’t disappear; they metastasized. The results are unfolding before us. August of 2008 may turn out to be far more dramatic than August of 2001 ever was.

Syriana

Because Stephan Gaghan’s recently released film Syriana is a high profile thriller involving the politics of oil, many peak oil activists have seen it as an opportunity to raise awareness about the coming energy crisis. Gaghan has in fact promoted the film as a “discussion about world dependency on oil,” and the film’s website has a link to an affiliate site called “Oil Change”, billed as “a campaign to reduce our dependence on oil.” Unfortunately, the film, while in many ways well-done, may actually serve to obscure rather than expose the real energy issues the U.S. and the world face.

In his previous film, Traffic, Gaghan organized multiple storylines around a single theme: illegal drug trafficking. In Syriana, the structure is the same, but the drug trafficked is oil. The movie focuses on several loosely connected characters: an energy analyst (Matt Damon) who, through a tragic twist of fate, gets an contract to advise the heir apparent of an unnamed Persian Gulf state; a CIA agent (George Clooney) who is betrayed after trying to arrange the assassination of that same oil prince; a corporate attorney (Bennett Holiday) who is given the morally dubious task of making a shady oil company merger possible; and an unemployed Pakistani oil worker (Mahar Munir) who is led to become a terrorist.

The actors all give excellent performances, and Gaghan has an eye for shooting scenes in surprising yet effective ways. But for all the dramatic weight of the individual scenes, the movie fails entirely to bring home the most important truths about oil—that it is a finite, irreplaceable resource, without which modern society as we know it would not exist. At only one point in the film does a character (Matt Damon) allude to the fact that “it [oil] is running out” and this only in the context of a speech explaining why Western governments want to prevent the development of true democracies in the Middle-East.

Meanwhile, the rest of the film subtly reinforces the opposite idea: that the machinations of government and industry are the cause, and not the result, of the fact that oil is a finite resource. This is not to deny the harsh reality of governments and businesses struggling for resources. But to be the truly courageous film it aspires to be, Syriana would have to go beyond supply-side examinations of oil production and look at the nature and structure of demand—from the vast exurbs, where Americans in SUVs commute 30 miles each way to work and take an additional half-dozen car-trips a day, to the energy intensive modern industrial farm, to the globalization of economies—in short, all of the things that make the geopolitical machinations necessary, and which will either change dramatically or disappear at the waning of the oil age.

Review: The End of Suburbia

Written and Directed by Gregory Greene

At the closing of the documentary film, The End of Suburbia, author James Howard Kunstler offers some final thoughts on the future of America: “Irony was the ethos of the late twentieth century,” he says,

“but as we move into the twenty-first century, we’re going to discover that irony is a luxury we can’t afford anymore. Our lives are going to depend on whether we have an environment that . . . can actually support the project of civilization. We’re not going to be able to sit back and make fun of it and enjoy it ironically. That part of our history is over. It’s time to get serious.”

Of course, if our energy-depleted future unfolds as Kunslter and the other subjects of the film predict, the result will be ironic—though more in the manner of Greek tragedy than of the Simpsons.

Nontheless, Kunslter’s point is well taken. As he points out in the film, even many people who live in the suburbs these days find it easy to mock them—which itself says something about what we have all been conditioned to accept from our physical environments and culture, and which makes the film’s final scene, a 1950s film clip celebrating consumerism and suburban life, especially jarring. Directly juxtaposed with Kunslter’s comment, and coming after much similar footage, the intended message of yet another campy scene is on a first take unclear. Does Kunstler’s point indict the film? Or does the film indict its viewers?

It is easy, after all, to watch a film like The End of Suburbia—especially the first half, which makes liberal use of earnest 1950s film clips to lay out the history of the suburbs—with mild, perhaps even affectionate amusement. Today we pretend to be removed from that bygone era—more sophisticated, more knowing, but we have been trained to look back with at least some nostalgia at that time of lost innocence.

What the old footage really illustrates, though, is that suburbia itself is the product of the immense, top-down conformity of the era in which it was started, and inasmuch as we perpetuate that model today, we are still living in the 1950s. The fact that our physical environments have failed almost entirely to evolve beyond the sterile conformism of that time would seem itself to be a sign of a serious cultural stagnation. No matter how hip or liberated we pretend to be, we still live someplace, and the kind of place that is matters—energy issues aside.

Most of the narration in the first half of The End of Suburbia comes from interviews with Kunstler (our most famous and most caustic suburban critic) and Peter Calthorpe (who is, with Andres Duany and Elizabeth Plater-Zyberk, one of the three most influential New Urbanist neighborhood planners), with some other commentary Richard Heinberg and others.

In the second half of the film, The End of Suburbia delves into the facts of peak oil and how energy depletion will soon bring our current way of life to an end. Casting the suburbs as both villain and soon-to-be victim in the peak oil grand narrative may seem like an obvious choice for anyone who has been introduced to the subject through the work of Kunstler; but there are certainly other ways to approach it.

In fact, other than Kunstler, none of the energy commentators in the movie (Deffeyes, Campbell, Ruppert, Heinberg, Simmons, Darley, Klare, Bakhtiari—to the director’s credit, almost all the famous peak oil experts make appearances) is particularly focused on the issue of suburbia per se, though most would probably agree that the suburban project as it stands is doomed. None of their comments will surprise anyone who is already versed in the issue of energy depletion; but The End of Suburbia does an excellent job of making the concise, powerful case for peak oil. To have that case presented not by one but by many experts, including petroleum geologists and an energy investment banker, gives weight to the film. It is hard to visually dramatize the threat of energy depletion, but Green manages to do it.

If there is one weakness in the film it is that Green presents no peak oil skeptics—even to refute them. Many people who watch the film will therefore come away unconvinced, clinging to the common (if fallacious) arguments that the market and high technology will save us.

One also occasionally gets the impression that Green is quoting his experts selectively to emphasize his own point: not just that we about to hit an energy crisis, but that that crisis is best understood in the context of the suburbs. It is a point somewhat undermined by his own experts; Calthorpe, for instance, while eminently knowledgeable about the history of suburban development, comes off as less than convinced about the significance of peak oil, saying at one point that there are many reasons to retool the suburbs in addition to energy depletion and that we shouldn’t just focus on one. Kunstler—long an advocate of New Urbanism—is pessimistic about the feasibility of rebuilding our society in time.

In another way though, Green’s choice to focus on suburbia is a bold one. The connection between the design of human habitats and the use of energy may not be the only frame for the peak oil story, but it is one of the most convincing. Figuring out how to make use of oil and gas has allowed our civilization to do things in the last hundred years that would have been be utterly unimaginable to previous generations. Explaining in the starkest terms how those things (particularly the car culture and the affluence it created) are threatened is perhaps the best way to make the point that energy depletion is more than just a serious issue, it is a crisis. That we squandered our fossil fuel inheritance building a shallow culture of consumerism and cheap sprawl is almost beside the point now. The question now is, how do we learn to live without it?