Economics, USA

Pulling Plugs.

I’ve Seen the Lights Go Out on Broadway –
I saw the Empire State laid low.
And life went on beyond the Palisades,
They all bought bright Cadillacs-
And left there long ago.

We held a concert out in Brooklyn-
To watch the Island bridges blow.
They turned our power down,
And drove us underground-
But we went right on with the show…

Billy Joel, Miami 2017

Not many will have seen the lights go out on broadway until today (IHT coverage). Although massive power outages are not too uncommon in the US, today’s blackout is apparently the biggest so far.

The “Blackout History Project” tries to keep the memory of past ones alive by archiving personal stories of what happened when the lights went out. Personally, I remember that the big 1977 NY power failure was a major story in my 8thgrade English textbook for some reason.

Power failures are an interesting phenomenon, for they demonstrate the vulnerabilty of extremely complex systems like modern industrial societies. Sometimes we forget how much infrastructure is needed to keep such a complex web alive. And we ought not to – low tech beats high tech, every single time, if used appropriately. Just like we do it at home whenever we get annoyed at the deficiencies of one operating system or another – we hit the button, we pull the plug.

That, of course, is a controlled exercise. A power failure, by definition, is not planned. It is either an accident or the consequence of an attack. As this one, according to most commentators, was likely an accident, there will be a lot of questions, just like in the aftermath of the California blackouts a few years ago.

In a Larry King Live special edition former US energy secretary Bill Richardson stated that America might a superpower, but one with a third world electricity grid. When asked if this could happen in Chicago, San Francisco, New Orleans, he said –

“Yes, it can, Larry, and the reason is that our transmission lines, our electricity grid is all interconnected. And since we have not built enough transmission lines, the existing lines have an enormous amount of electricity pent-up. In other words, overload. And what we need is basically the federal government and the states working together to allow utilities to invest in new technologies, to bring in wind power and solar and biomass, not just get electricity from the traditional coal and nuclear sources. Diversify, invest in new modern plants. But also, Larry, this is – you know, this is very technical. But the Congress has been, for years, not passing an energy bill which contains what are called reliability standards, mandatory reliability standards on utilities, many that are monopolies, that don’t want this kind of control, that says to them, look, you cannot have more power than you can absorb. And what they had here in New York – well, in the Niagara power grid is too much power, an overload of power.”

So apparently, it was an overload. No wonder somebody pulled the plug.

But the regulation part is interesting. Even though problematic incentives for utility industries seem to be more common in the US, there is no guarantee whatsoever, the EU is not replicating these mistakes while liberalising the EU energy market. In fact, I became rather scared last December when I talked to an EU energy market official and learned that there are mostly lawyers concerned with these issues.

Of course, it’s not the lawyers themselves who pull the plugs. But you might remember – lawyers don’t calculate (anything but their fees). And a bit calculus can come in quite handy when constructing institutional arrangements for complex infrastructure service providers to conduct business in. If this is not done the right way, darkness will follow, sooner or later.

Some of the lessons to be learnt from the Californian blackouts some years ago have been summerized by Paul Krugman. If your read it you will no longer wonder if it is actually legal issues that are primarily at stake here.

German Politics, oddly enough, quicklink, sex

Skandal im Sperrbezirk?

The ongoing investigation regarding a ring of east European women trafficers that has led to alligations of Cocaine posession against the German “political” talk show host and vice-chairman of the Central Council of Jews in Germany, Michael Friedman seems likely to become some sort of the Berlin Republic’s first Heidi Fleiss scandal.

Meanwhile, Sueddeutsche Zeitung reviews the Bonn Republics history of scandals and comes to the conclusion that there really wasn’t anything saucy… but now, luckily, things are about to change ;-).

Economics, quicklink

CAP. Again.

However much I am fascinated by institutionalised European cooperation (aka EU), there’s one policy area in which even the most pronounced criticism is likely to be insufficient: The Common Agricultural Policy – reform resistent. Not that the US is only concerned with its effects on the world’s poorl, given the US farmers’ export interests, but disregarding underlying interests for the moment – the criticism sticks (from the NY Times).


High Noon?

Josef Joffe, editor of Die Zeit called this week’s main OpEd column “The Showdown” [link in German].

Well, in my opinion, it’s not yet “High Noon”. Hans Blix will get some more time to look for the guys holding smoking guns. He will get at least as long as there will not be a second resolution, or as long as Tony Blair needs to make up his mind whether to go to war without a neither a second resolution nor a proper majority of his own in Parliament. Last Wednesday night, 121 out of 413 Labour MPs told Blair in the House to go back to Downing Street and read some more student papers in order to make a better case for war. And more seem poised to defy their government on this issue.

Given that a government office is the only real political (and financial, too, by the way) payoff for politicians the British political system has to offer, and that these positions are to a large extent Prime ministerial appointments, 121 votes against a government-proposed motion become even more impressive. Labour’s majority in the Commons is 83 seats. You do the math.

On Wednesday, the motion was approved by the British lower house only because it was supported by Members of the opposition.

At least legally, things don’t look too bleak for the British Prime Minister. This is what the Guardian’s news dispatch said –

Labour’s Graham Allen asked: “Under what legal or statutory authority will you commit British forces to war in the Gulf?” Very precise questioning there, and Mr Blair, who is a lawyer, knew exactly what he meant. Under British constitutional law and tradition, what is called the royal prerogative is still used to declare war in this country. It’s one of those untidy hangovers from medieval and early modern Britain. What the king used to do, the prime minister now does, and he doesn’t have to get the permission of parliament or anybody else. Mr Blair was evasive – the words “royal” and “prerogative” did not cross his lips. Instead, he said: “We act on precedent, and whatever we do will be consistent with the constitution and with international law.”

But let’s face it – politically, it would clearly be bizarre and possibly suicidal for Her Majesty’s New Labour Premier, who in his earliers days set out to fundamentally modernise the British political system, to rely on a questionable legal construct called “royal prerogative” to order British troops to fight a war not even a his own Parliamentary party is willing to back. Period.

But as Blair has committed himself so uncompromisingly to the “war now!” camp, he does not have too much space to manoeuver, just as Schröder on the other bank.

However, now the British influence in Washington really shows – I seriously doubt Washington would invade without British backing. The political difference between a war that is fought without proper legal justification by the UN and a war that is literally fought unilaterally is so big even those American hawks whose horizon is the Beltway must be able to see it.

So, in my opinion, it’s not too much of a surprise to hear a bit more conciliatory words from Washington these days. [Link in German]

German Politics, Germany

Too much water. And Moral Hazard.

THW Hochwassereinsatz DeutschlandFaced with the destruction of the floods currently covering a good part of East Germany and the Czech Republic, more than 4m victims will only be able to deplore their impotence with regard to the destructive potence of nature and to feel the anxiety of not knowing how to go on with their lives.

It is truly a tragedy what is happening these days after 12 years of reconstruction in the formerly Communist East. But for all their losses, none of the victims is faced with the moral dilemma which German government politicians will have to tackle. On the one hand, their human hand, they will feel compassionate just like everyone else (and will deplore the budgetary consequences of generous government bailouts for the affected regions). On the other, their (party) political one, they will see the enormous potential this national crisis is offering to them in public relation terms with the general elections looming in five weeks. But then, their private smugness will certainly be offset by the mourning of opposition leaders…

German Politics

Miles & More.

Remember the words of the great Baz Luhrman:

“Accept certain inalienable truths: prices will rise, politicians will philander, you too will get old; and when you do, you’ll fantasize that when you were young, prices were reasonable, politicians were noble, and children respected their elders.”

OK, history teaches us that politicians will philander. For German politics then, this week was certainly historical – this week, a fair amount of well known and less well known politicians fell prey to an unprecedented wave of accusations and subsequent resignations – the most prominent politician to step down was Gregor Gysi, senator for economics in the Berlin state government and the most prominent figure the socialist Party of Democratic Socialism (PDS) has to offer.

And what is the fuss all about? It’s about Miles & More, the well known frequent flyer programme of Lufthansa. According to the internal rules of the Bundestag, deputies are not allowed to use the miles they received for flights conducted for official business for non-official purposes. But then, normally, their frequent flyer accounts are protected from official inspection by Lufthansa’s privacy rules. No wonder then, that some politicians relied on Lufthansa to protect their privacy from the public and used their miles for private purposes. But somehow, someone was able to obtain this information and so it was subsequently published by Germany’s most infuential tabloid, BILD, with the above consequences.

Have we all gone bonkers? How can we expect anyone of modest intelligence to become involved in high-profile politics if the BILD-Zeitung and other media can ruin their careers with a headline concerning something as unimportant as the discretionary private use of frequent flyer miles.

We know that politicians will philander, fair enough. But if we use a standard like the one used in German politics this week, the statement might become untrue in the future, for the simple reason that there won’t be any politicians left to philander.

The person who has never used a corporate copier or sent and email from the office for private purposes throw the first stone. All others, sit down and be quiet.