The Regulation, Shay’s Rebellion and Our Energy Economics Future

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It is not the Euro that is failing Europe, it is Europe’s experiment with its own Articles of Confederation that has failed it for the same reasons our own weak approach to governance adopted in 1781failed to meet the needs of the liberated American colonies.

Greece is Europe’s equivalent of our Shay’s Rebellion in 1786.

If we still taught American History and Civics in American public schools, which we mostly do not anymore, our children would be learning about our early attempts at cobbling together a nation from the remnants of the American Revolution which left the thirteen colonies as sovereign states but virtually helpless.  The states jealously guarded their independence but separately felt like Little Red Riding Hood waiting for the big, bad, British wolf to come back to eat them one at a time.

In 1781 after five years of wandering in the sovereign wilderness, the Continental Congress formed the Articles of Confederation to try to bring some order to the situation.   After 1776, the states created permanent committees with their own staff operating under their direction to encourage cooperation among the thirteen states.  A Marine Committee led the navy. The Board of War and Ordnance ran the army, and the Committee of Secret Correspondence served as our “state Department” coordinating foreign relationships and diplomacy. The problem was each of these committees or ‘departments’ operated independently and no one in the Continental Congress had the authority to supervise them or direct their actions.

Like the various EU treaties and the European Commission that has taken the same incremental steps toward forming one true European Union, the power in Europe still resides in the individual states and the rest is firefighting to keep disputes under control.  Much of Europe now has a common currency but, as the current economic crisis reveals, wealth transfer, subsidies, and credit cards with no spending limits are a poor substitute for the realities of economic life when the economy turns against you.

America’s Greek Crisis began with a movement called “the Regulation” and it was not unlike the Occupy movement we see today.  The regulation was made up of Revolutionary War veterans who had served their states and were demobilized at the end of the war with no job and no money.  They were truly the 99% of their time.  Often these soldiers had been paid in “Continental notes” or paper money printed by the Continental Congress. Remember George Washington was always begging Congress for money to pay the troops and even threatened to go home to Mt Vernon more than once to get some action.

The troops that did receive payment tried to cash in their Continental notes when they got home but the states refused to honor them.  The result was without money or jobs to pay their bills the 1% began foreclosure proceedings on farmers land.  A movement called “the Regulation” began in 1786 in western Massachusetts when large groups of protesters would show up whenever the courts were scheduled to meet to approve foreclosures.  But instead of just camping out like the occupy movement does today, the Regulation marched in military formation to intimidate the courts to stop seizing properties until after the next gubernatorial election. Over a five month period in 1786, without any organized leader, the “Regulators” showed up in Northampton, Springfield, Worcester, and other Massachusetts towns where the courts were meeting.  They surrounded the courthouses to close them down and prevented the 1% from getting the court foreclosure orders to seize property.

Shay’s Rebellion of 1786-87 that began in western Massachusetts during what we would call today ‘Occupy Springfield’, when one such demonstration by “the Regulation” got out of control.  This time the band of protesting farmers was led by Daniel Shays who had been a captain in the American Revolutionary army began with the usual Regulator tactic of surrounding the court house to stop foreclosures and debt collection on the 99%. Looking for more firepower to enforce their will Shay’s 1,200 man militia attacked the Springfield Armory but was beaten back by troops inside. While Shay was later tried and convicted of rebellion, Massachusetts did pass laws to ease the economic impact of debtors.

Shay’s rebellion showed the states that they could no longer coast and risk chaos so another committee of the states working under the auspices of the Continental Congress began work drafting what in 1789 became the current US Constitution.

Is the Occupy Movement is our modern day equivalent of “The Regulation”?

So, the Occupy movement may be a fragmented leaderless group of protesters with no clear purpose or it may be the modern day reincarnation of “the Regulation”.  But the Occupy movement is not a new idea and it is having the same sobering effect of drawing attention to the plight of the 99% who feel aggrieved and are blaming it on the greed of the 1% as it did more than 200 years ago.  The Occupy movement today is framing the issues for the 2012 election and the answer from the opinion polls is Americans feel the country is not on the right track today and is looking for leaders who can lead not just demagogue.  Just as in 1787, it is time for solutions that work. Fortunately for America, the problem is not our Constitution but the inability of our leaders to get beyond the hyper-partisan rhetoric and sit down to develop a common agenda for action.

The 1781 Articles of Confederation were too weak to hold a fragmented collection of thirteen states together securely enough to build a strong nation.  The question is whether the fragmented European Union is any better?  The problem isn’t the Euro as a common currency, it is Europe’s unwillingness to decide whether it is one European Union now that it much face he mess caused by a bunch of nation states caught misusing a common currency to run up their credit card tabs well beyond their credit limit thus threatening the entire EU.  The difference between Europe and the United States is the EU is the Articles of Confederation when Europe needs a constitution sufficient to the EU tasks ahead.

The US, EU and China Must Hang Together or Hang Separately

We are also learning that we live in one economically interconnected world for better or worse. With both the US and EU economies weak and uncertain, the light is shining on China and it is not as rosy as Beijing would like us to believe.  The reality therapy for China is when you live in a fast growing economy like theirs that depends upon continuous export growth to feed the aspirations of the Chinese people having your two largest export markets in the economic ditch is not good news.  China is trying desperately to manage its own bubbles, keep its exports growing, and assuage the domestic demand for middle class lifestyles in the urban areas and government investment to bring the rural areas out of poverty to narrow the income gaps.  China has many big problems in a competitive global market and like any shark in the competitive global waters of our inter-related economy it must keep swimming or drown.

In all this chaos is plenty of opportunity for good news for Europe, for America, and for China.  What of the rest of the world?  The rest of the world is trying to play one of the three against the others.  If the EU, US or China permit that to happen they know that all three lose big time.   Working together they can create a more stable global economy and a cleaner, safer and more prosperous future and prevent a lot of mischief and conflict.

Meanwhile back at home, each must get its house in order and get its economy moving in the right direction as evidenced by public confidence.  Restoring confidence requires leadership and constructive actions to unleashed hoarded cash, encourage investment for growth and job creation, and provide more certainty about the business climate, regulations, taxes and looming costs for failed housing, health care and financial sectors.

Ironically, China is ahead of the US and EU in the leadership transition having just gone through what passes for their own election within the party leadership that runs the country.  Now the US and EU are going through our own transitions to new leaders with the  ‘EURO Spring’ toppling the leaders of the PIIGS one at a time and the 2012 US Presidential election a referendum on whether Barack Obama has the ‘right stuff’ to get us on the ‘right track’ or will he use a 4 year renewal of his White House lease to do more of the same stuff that public confidence says isn’t working.

What does this have to do with energy?

The US, EU and China need to replace political correctness with political, economic, security and market cooperation to achieve their respective goals, energy and the environment is a good place to start.

  • Wind and Solar Grid Party Prices.  Both the US and EU want to grow the market share for renewable energy and China has demonstrates its capacity to flood the market with low priced turbines and PV panels.  The problem is the US and EU distort market signals by heavily subsidizing purchases.  First they did so to jump start the renewable market, then they hoped to build local manufacturing, but the Chinese suctioned up the FiT subsidies to feed their export market growth.  Now the Chinese have the manufacturing capacity and desperately need the markets.  No problem, end the US and EU subsidies and let the Chinese compete.  This reduces fiscal demands on EU and US budgets and lets the market choose the best technology and the lowest competitive price.
  • EU and US Energy Industrial Policy Distortion In a political correctness driven effort to reduce greenhouse gas emissions, savage fossil fuel use and promote green energy technology and jobs, both the US and EU are wasting billions of their taxpayers money on trying to pick winners and losers in the market among fuels, technology and companies.  This is the 1% problem of crony capitalism with the hard earned tax dollars of the 99%.  Stop it!  Let power generation compete with demand response and energy efficiency in the integrated resource planning competition that served us well for more than fifty years.
  • Domestic Energy Security starts at Home.  Unconventional oil and gas are an equal opportunity advantage for the US, EU and China.  Building domestic energy productive capacity from fossil resources both conventional and unconventional as well as geothermal, wind and solar and hydro is good for all and reduces our dependence upon imported fuels.
  • Smart Grid Global Interoperability. The technologies needed to turn the power grids of the world into smart grid require scale to drive down the price of the equipment and speed the transition.  Instead of doing this state by state, country by country the common cause of agreeing to one set of global standards that work in China, in EU and the US would speed the adoption of smart grid technologies and produce benefits for customers faster than the current slow debate.  Get on with it!  Designate preliminary standards and let the vendors compete to deliver products across the three global markets to serve the need in an open common market for the smart grid between China, US, EU.  If China can commoditize and build the products cheaper let them do so, the value-added is in the implementation and services offering plenty of opportunity for all.  But condition Chinese market share on a level playing field for EU and US investment, manufacture and market growth in China for the same products.

What about the rest of the world? 

Let them follow our collaborative lead or go their own way.  But working together the EU, US and China can create an expanding global market for energy and environmental performance that works for each of us and works for everyone else who wants to do business with us.  That is the only way to force OPEC and Russia and others to compete on fair terms in competitive markets.

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