The Core of the Issue

Think of this as Volume 14, Number 35 of A-Clue.com, the online newsletter I've written since 1997. Enjoy.

Every political crisis in American history is, in fact, a sign of economic transformation.

Today's transformation is the move from energy defined by resources to energy defined by devices, by technology.

There is plenty of energy around — from the Sun, from the ground, from the wind, from the air all around us. All we need do is harness and deliver it. This will trnasform all our financial, political and international relationships, so those who depend on the old relationships are fighting back with everything they have.

It's not about mosques or gay marriage or anything else we seem to worry about. All these issues are means to an end. They are pushed by, and products of, the financial strength of the oil power. Follow the money and this becomes obvious.

It has always been this way, but a brief review:

• The 1960s saw a switch from a manufacturing-based economy to one based on technology and content.
• The 1930s saw a change from a production-based economy to one based on consumers.
• The 1890s saw a change from a collection of local markets to a single national market.
• The 1850s saw a change from an agrarian economy to one based on manufacturing.

In each of these cases there appeared, on the surface, to be other issues in play. Social issues in the 1960s. Economic issues in the 1930s. Urban and rural problems in the 1890s, and of course the coming Civil War.

But these were, in fact, cover for the economic changes going on beneath the surface. In each case, economic interests who were losing-out to change sought political power in order to secure their position. In the crisis election they lost that power, and they then engaged in a twilight struggle against the new over issues only tangentially-linked to what was, in fact happening.

In all these cases the tide began to turn when the issue was confronted directly, when political power shifted from the ground held by the old economy to that of the new. Lincoln came from Illinois, replacing a string of men linked to slavery and agriculture. McKinley came from Ohio, a manufacturing center in need of stable input prices, replacing men associated with financial manipulation of markets. FDR represented consumers, overcoming progressives representing producers. Nixon and Reagan both came from California, home to Silicon Valley and Hollywood.

Economically, the current crisis has more in common with that of the 1890s than any other. President Obama comes from Illinois, a manufacturing center, replacing a Texan who based his career on resources. The rising "green" economy will require massive amounts of high-tech manufacturing, and a re-organization of our electrical grid, which was born in the Midwest. A lot of the talent we will need to make this transformation happen comes from the heartland, not from the oilpatch.

The President's biggest mistake in office, by far, is one that is completely hidden from view. That is, his refusal to directly confront the real enemy. Not just the Koch brothers, but the economic interests they represent. We are still subsidizing coal, and oil, and natural gas. The aid we give green manufacuturing pales in comparison. The question and answer are simple, not complex.

Changing our economy's incentives will unleash a flood of capital and millions of jobs. We need an industrial recovery, not a consumer one.

Why delay? One reason is that research is advancing at such a breakneck pace that the solar cells, and solar technologies, that would have made sense two years ago are no longer competitive. We don't yet know what will make the most sense in mass production, which is one reason why the talisman of our age is the windmill. We know what windmills are, and what they look like.

But there are other alternative energy technologies that are mature besides wind. Geothermal technologies are very mature. We know what the new grid has to look like. Insulation is simple, technologically speaking.

What critics deride as "cap and tax" and supporters call "cap and trade" is merely a means to a necessary economic end. Charging for the externalities of resource-based energy raises its price relative to conservation and newer technologies, making the latter more competitive. You can get around the tax by reducing your use of energy and increasing the supply of alternatives. That's the economic transformation I've been talking about here for so many years.

The President is reluctant to make enemies, but in this case we have no choice. Because we do have economic enemies, ruthless ones, and most of them are in this country, not in Iran or Afghanistan. Like America's social conservatives, the Taliban are a symptom of a larger problem, an economic problem, ginned up by existing economic interests in order to regain political power.

There is still time for the President to tell us the truth, and confront our real economic problems. Al Gore has been virtually silent since January 2009. John Doerr has been laying low. Vinod Khosla has been quiet. Or they appear to be. In fact they have been investing, they have been buying, they have been setting the stage for great fortunes. (If Al Gore becomes James Cox, it's no tragedy.)

These men, and thousands of men and women like them, represent the new economy, and it's the promise of that new economy that, once harnessed, will bring us the change we need.