Saturday, June 01, 2019

Abortion, Inequality, Israel-Palestine, and CHINA !



Quoted verbatim sans comments:

1.  Michael Wear on the American debate over abortion rights:


'Abortion politics in 2019 is a morality play about what happens when one side has all the political power, yet feels culturally embattled. In this atmosphere, victories are not satisfying if they leave the other side with a foothold, a vestige of respectability.  [It] is no longer about policy wins, but about establishing dominance. This is why Governor Andrew Cuomo could not be satisfied with the passage of the Reproductive Health Act, which eliminated several restrictions on the procedure, but instead had to light up the Empire State Building pink, to declare that abortion rights were now creedal in New York. It was not just the passage of the Reproductive Health Act, but specifically the display of cultural force, that made abortion opponents feel so embattled and isolated.

This dynamic was also evident in Alabama, where the people in power hold the opposite position on abortion as their counterparts in New York and recently passed H.B. 314, a bill that virtually outlaws the procedure.

One scene from the Alabama Senate debate furnishes a quintessential example of the decline of our democracy, of the diminishment of any capacity our political process might have had to help us work through difficult issues together. During the committee markup of the bill, lawmakers passed an amendment to provide an exception for rape or incest. On May 9, as H.B. 314 was headed toward a final vote, Alabama’s Republican Lieutenant Governor Will Ainsworth broke protocol by stripping out the amendment without making a motion or acknowledging his Democratic colleagues’ requests for a roll-call vote. Democratic State Senator Bobby Singleton shouted, “There was no motion. You didn’t even make a motion!” Ainsworth simply ignored his colleague’s interjections.'



2.  Walter Scheidel on the history of inequality:


'Inequality has been written into the DNA of civilization ever since humans first settled down to farm the land. Throughout history, only massive, violent shocks that upended the established order proved powerful enough to flatten disparities in income and wealth. They appeared in four different guises: mass-mobilization warfare, violent and transformative revolutions, state collapse, and catastrophic epidemics. Hundreds of millions perished in their wake, and by the time these crises had passed, the gap between rich and poor had shrunk.

The first of these forces was very much a creature of the industrial age. Earlier wars had produced mixed results, as victors profited and losers paid. The Civil War is another example: It launched the careers of John D. Rockefeller, Andrew Carnegie, and other Northern plutocrats, but ruined Southern slave-owners. Not since the times of the ancient Greeks had intense popular military mobilization (paired with egalitarian norms and institutions) helped curb economic inequality.

Second are revolutions that truly transformed societies—the sort that were born of the two world wars. From 1917 on, communists in Russia, China, and elsewhere confiscated, redistributed and collectivized private wealth, and set wages, leveling inequality on an unprecedented scale. [...]

If history is any indication, then, the resurgence of inequality since the 1980s should not have come as a surprise. The effects of violent leveling invariably abate over time: Populations recover when plagues subside, failed states are replaced by newcomers. By now the aftershocks of the 20th century’s great wars have faded. Top tax rates and union membership are down, communism is defunct, and globalization, however reviled, is (still) in full swing. The four levelling forces will not return any time soon: Technology has made mass warfare obsolete; violent, redistributive revolution has lost its appeal; most states are more resilient than they used to be; and advances in genetics will help humanity ward off novel germs.  In the coming decades, the dramatic aging of rich countries and the pressures of immigration on social solidarity will make it ever harder to ensure a fairly equitable distribution of net incomes. And on top of everything else, ongoing technological change might boost inequality in unpredictable ways, from more sophisticated automation that hollows out labor markets to genetic and cybernetic enhancements of the privileged human body.'



3.  Khaled Elgindy on the Israel-Palestine peace process:


'... laying out an economic plan ahead of a political vision is simply the wrong way around. As many analysts have pointed out, prospective donors and investors are unlikely to be forthcoming when they do not know what the endgame is or what it is they are being asked to invest in. Previous U.S. presidents, from Ronald Reagan to Barack Obama, also tried to promote “quality of life” for Palestinians without directly challenging the Israeli occupation. Moreover, the idea that so-called economic peace could be a substitute for a meaningful political horizon has simply never panned out.

By focusing on economics, the U.S. administration has fundamentally misdiagnosed the problem. As numerous United Nations, World Bank, and other reports have found, the greatest obstacles to Palestinian economic growth are restrictions imposed by the Israeli occupation in the West Bank and its ongoing siege of the Gaza Strip. In other words, what Palestinians lack is not funding but freedom. As the Palestinian American businessman Sam Bahour recently put it, reviving the Palestinian economy “doesn’t require a grand plan, nor does it require a grand workshop. It requires Israel getting its boot off at least the economic part of our neck.” [...]


But the biggest reason to doubt the feasibility of the administration’s plan is its own record. Since recognizing Jerusalem as Israel’s capital in December 2017, overturning 70 years of U.S. policy and taking the hotly contested issue of Jerusalem off the table, the administration has closed the Palestinian mission in Washington and systematically eliminated virtually every form of U.S. economic and humanitarian assistance.[...]  The proposition that [the U.S.] is now going to spearhead the international effort to promote investment in Palestinians or work toward the betterment of Palestinian lives is nothing short of fraudulent. Indeed, while U.S. officials have always had a certain blind spot with regard to Palestinian needs and aspirations, never has a U.S. administration shown as much open hostility toward Palestinians and their well-being as the Trump administration.'

4. Dan Meegan on the definition of "fairness" across the political spectrum:


'There is more than one way to decide who is deserving of what.  One is by need: Some people have more than they need, and others need more than they have. Even when liberal leaders describe policies that are beneficial to everyone, they make it clear that the most important beneficiaries are those whose needs are most urgent. [...] Still, there are other ways of judging what’s fair. Conservatives tend to value equity, or proportionality, and they see unfairness when people are asked to contribute more than they should expect to receive in return, or when people receive more than they contribute. [...]

American liberals looking fondly over their northern border often misunderstand why policies considered left-wing in the United States are so popular in Canada. Middle-class Canadians support their health-care system not because it’s good for the needy, but because it’s good for themselves. When they get angry about threats to their health-care system, it is because they take the threat personally—they are defending their own interests rather than those of some underprivileged stranger.'

 

5.  Ethan Kapstein and Jacob Shapiro on China's Belt and Road Initiative:


'The Belt and Road Initiative is as much a domestic initiative meant to address structural weaknesses in the Chinese economy as it is a grand foreign-policy strategy. Given a combination of poor demographics, growing international hostility to its trade policies, and the specter of weakening domestic demand, Beijing cannot rely on homegrown supply and demand to solve its current and future economic problems. The Belt and Road Initiative represents an attempt to use China’s enormous financial reserves to create new markets for Chinese goods, services, and unskilled labor. That’s why the use of Chinese labor to build Belt and Road infrastructure is so often part of the deal. Recipients of Chinese investments are effectively financing Beijing’s efforts to manage its internal economic problems. Understood this way, the Belt and Road Initiative reveals Chinese weakness rather than strength. And that’s why a judo strategy could be so effective.

The United States should start by using existing international norms—set by multilateral institutions such as the World Bank, the International Monetary Fund (IMF), and the Organization for Economic Cooperation and Development (OECD)—to constrain China’s predatory lending practices and the political leverage they bring. For example, the OECD has long-established norms against the use of tied aid—funds that require recipients to use that foreign aid to purchase goods and services from the donor. Tied aid is frowned on because it forces recipient countries to spend their money inefficiently. And even if Belt and Road funding—which primarily takes the form of loans—does not formally constitute foreign aid, Beijing often violates the spirit of that principle by mandating that infrastructure projects use Chinese contractors...'



* * *
Okay, I'll give one comment: politics are *always* local (domestic), even when it concerns/affects foreign relations.

Tuesday, May 28, 2019

... about that 2018 UN Climate Change report

All bad news, from just the last 2 years

All of the above headlines share one common thread: they are conditions directly caused by, or exacerbated by, climate change.  Perhaps you think it's just a "global" problem that doesn't  affect you, maybe only those living in Middle Eastern deserts or around the Arctic Circle.  But Jakarta also?  See, not even my kampung is spared.

... So this lead me to spend the weekend going through the 2018 IPCC report, which made a splash last October.  The full report is 400+ pages long and written in an esoteric format (because it is not original research; it's basically a summary of other people's existing primary research).  I skipped the lengthy PDF download (it's even longer than the Mueller report) and went straight to the "Summary for Policymakers", which is still 32 pages long, and read the charts first.  Still, it's amazing what we can learn by browsing a handful of diagrams -- especially for a layman with zero knowledge of environmental science.

So the "Global Warming of 1.5⁰C" by the Intergovernmental Panel on Climate Change is really a misnomer.  We are really on pace for something like 3-4⁰C of warming (against a baseline of year 1850 -- approx. the start of the industrial revolution, when we started using fossil fuels en masse).  The paper talks about 1.5 degrees, but it's an extremely optimistic scenario based on aggressive transformation of the global economy.  Nevertheless, the research is unequivocal that the warming is anthropogenic -- caused by human activity -- which is good because it means we can actually do something about it.

The direct impact of climate change is devastating:
  • Sea-level rise at least 10cm for every 0.5C rise of global temperatures, and ice sheet loss is irreversible over >100,000 years
  • Biodiversity and ecosystem loss on land and sea
  • Climate-related risks to health, food security, and water supply
Damages are estimated at US$54 trillion worldwide.

Avoiding the most serious damage requires massively transforming the world economy and energy usage within just a few years.  If you thought the Green New Deal was batshit crazy, then brace yourself:
  • Damages will be spread worldwide but unevenly. >50mn people in the US, Bangladesh, China, Egypt, India, Indonesia, Japan, Philippines and Vietnam will be exposed to coastal flooding
  • To prevent >1.5C of warming, the report said, greenhouse pollution must be reduced by 45% from 2010 levels by 2030, and 100% by 2050.
  • By 2050, use of coal as an electricity source would have to drop from nearly 40% today to between 1-7%.   Renewable energy such as wind and solar, which make up about 20% of the electricity mix today, would have to increase to as much as 67%.

Now let's go to the charts:


Since the industrial revolution, it took us some 140 years to pollute the earth and raise global temperatures by 0.5C; the next 0.5C took us just 30 years; and the next 0.5C is expected to take us <20 years, if not sooner.  It's clear that we've taken earthly resources for granted without much care of what's left behind.



The above shows that our civilization produces 40 Gigatons of carbon emissions every year, and that we need to reduce it *down to zero* in just 30 years to achieve our targets.  Can we just blame China and press them to, like, do something?  Let's turn to MIT Technology Review.


So, the answer is a resounding "No".  China's is the highest in the world, but even combined with USA, EU, and India, they amount to just 15% of annual greenhouse emissions.  This is a global problem in desperate need for a worldwide, coordinated solution.


The above shows the uneven distribution of temperature change: the poles bear the brunt.  For its part, Russia is fully embracing the problem by accelerating the creation of a new shipping route, while the US only wishes it could do the same //sad but true.   


So we need to fundamentally change how we generate energy.  Nuclear is a good source: very low carbon footprint, we just need to solve the cost issue and that pesky problem of long-term radioactive waste storage -- difficult yet shouldn't be intractable challenges.  Solar, wind and hydro are also possible, but they tend to be unreliable, depreciates rapidly within <20 years, and surprisingly, have (potentially large) carbon footprint and ecological impact.  The solution is likely a combination of several approaches, implemented in managed moderation.  Or maybe there's some new idea in the horizon, some technological innovation, but it's no excuse to postpone making good on environmental policy.  We can already see new developments that can help us better adapt to the changing world, like more resilient crop breeds, and satellite imaging to better prepare for wildfires..

---

Humanity has shown great ingenuity and staying power in resolving seemingly existential threats.  Remember the hole in the ozone layer caused by aerosols and CFC?  It's healing, and should be completely "cured" by 2030.

But if we've learned anything about American leadership on this greatest challenge of our lifetime, it has failed us.

Thursday, May 23, 2019

Netflix, Uber, WeWork, and CHINA!


Whew it's been a big week in the tech/startup world.

1. Uber IPO went sour

The ride-hailing giant capped off its tumultuous journey with a NASDAQ listing Friday.  Shares disappointed, falling well below IPO price, but the company still commands a whopping $69bn market cap.... which is still lower than the pre-IPO valuations at which investors in the past 3 years entered.  Maybe it's because Silicon Valley loves Uber -- its constant fights, breaking of laws, habit of pouring VC money (=lobbyists) onto problems -- more than the wider public does?

Investors are basically betting that the juggernaut will continue to dominate the market, until such time that autonomous vehicles can replace those pesky (costly) drivers.  By that [undetermined time in the future, can be up to 30 years??], Uber's bottom line will turn green -- otherwise the company has shown no visible path to profitability (it burned $2bn of cash in 2018 alone).  But in the meantime, Softbank to the rescue (again) ?


2. China's Luckin Coffee also failed to excite


An outlet in Beijing

China's Starbucks/convenience-store-coffee competitor Luckin Coffee listed on NASDAQ Wednesday.  Shares fell below IPO price -- not unlike Uber and Lyft -- but the barely-two-year old 2,100-strong coffee chain still raised $560m, putting its market cap at $4.0bn.  Luckin has achieved "hyperscale", but let's hear it from Peking University professor Jeff Towson on the bottom line: the Chinese "don't seem to really like coffee" that much, so do any of those metrics even matter?  

Maybe it's just another case of China imitating a Western invention, and replicating it to scale [usually with the help of friendly government regulations/direct support].  -->See: Weibo.

Outlet at Jakarta's Grand Indonesia mall

If that seems rough, here in Indonesia a number of similar startups (Kopi Kenangan, Fore, Tuku, etc) looks to be modeled closely after Luckin.  Expect scenes like this in other markets.

3. WeWork also plans for IPO, skepticism abound

Co-working behemoth WeWork is a really strange animal.  Just like Uber, it's backed by Softbank, so operating losses never seem to faze them.  It's already the biggest tenant in Manhattan, and it's moved into co-living and other co-activities that generate no profits whatsoever -- I guess even the company doesn't believe its own core business could be viable.  It blindly focuses on the high-end segment, seemingly disregarding local market nuances. Now founder Adam Neumann wants to set up a real estate investment fund (named "ARK", after Noah, naturally) to buy up office properties to lease to WeWork.  Unsurprisingly everybody's screaming bloody murder conflict of interest.

Articles about WeWork are eerily reminiscent of how people described the past decade's housing crisis.  Just like the mid-2000s, "property values always rise... ", but now it's "... thanks to WeWork's presence".  Sure its sites are hip and wildly popular with clients, but that itself doesn't necessarily make the business model sustainable.  [I too can pitch an idea: why don't we sell $100 bills for $10?]  Ellen Huet from Bloomberg notes:

'...even by the standards of its cash-incinerating startup cousins, the company’s business model—taking out long-term leases and renting out short-term parcels—doesn’t deserve the favorable treatment of a tech company and looks glaringly vulnerable to an economic downturn as the global bull market in equities stuttersteps toward Year 12. “They don’t make money even with the economy roaring,” says Scott Crowe, the chief investment officer at CenterSquare Investment Management, which focuses on real estate. “If the economy softens, [it's all over].”'

4. Netflix faces impending doom

The video streaming/cord-cutting pioneer has less than 180 days to answer to a new competitor.  Disney is launching its video streaming platform, Disney+, and it will undercut Netflix's subscription pricing *and* pull all of its content out of Netflix.  We are talking all of Marvel, Pixar Animations, Star Wars, ESPN, NatGeo, Modern Family, The Simpsons, and all the classic characters like Mickey Mouse and Donald Duck.

Content is king, and Disney is still the king of content, for better or worse.


5. Tight driver market can bring autonomous trucks sooner

There's actual interesting development within autonomous vehicles, and it has nothing to do with Uber.  The US Postal Service, working with startup TuSimple, is testing self-driving trucks to deliver mail across Arizona, New Mexico and Texas.  USPS expects the technology to improve delivery times and costs, noting severe driver shortages and regulatory constraints among interstate freight haulers.

Amazon faces a similar issue, but is proposing a totally different solution: offering its own employees $10,000 to quit and become its delivery drivers.  

If anything, this suggests that maybe the coming robot apocalypse is just a tad overhyped.  In the future, *we* will be the robots.


Wednesday, April 24, 2019

What's with that black hole?


...So the interwebs went crazy last week with the first-ever photo of a black hole, and with the young computer whiz who was part of the team.  So what's the deal with the supermassive black holes, we've all seen pictures of them, right?

Concept art of an accretion ring and jet around a supermassive black hole. Although this has been our picture of how black hole engines ought to work for a long time, the Event Horizon Telescope has provided new evidence validating it. (NASA/JPL-CALTECH)

In case you didn't notice, everything we've seen have been artist illustrations (or Christopher Nolan's sci-fi) based on unproven theory, and this real-life picture shows that theory is, at the very least, on the right track.  But I'd say it's not really about black holes, it's a lot more profound.

We live in a depressing world plagued by wars, bigotry and xenophobia, criminality, and declining confidence over traditional institutions -- governments, culture, religions, and science.  So never take for granted the massive accomplishment -- something to be very proud of -- that we are able to link up 8 telescopes from Greenland all the way to Antartica, undertake coordination among 13 scientific institutions, and manage a global, multi-year effort towards one single goal.  That blurry orange blob is just the start -- not the end -- of a major scientific endeavor.


As with most scientific work, oftentimes we just don't know where things would lead to.  Viagra was discovered when chemists were working on heart disease drugs.  Alexander Fleming accidentally found mold as he was working with Staphiloccocus bacterium, leading to an antibiotic that has transformed modern medicine and saved millions of lives.

For the next 100 years, the single biggest challenge facing humanity is climate change.  We've already seen its adverse effects, especially on some of the most vulnerable societies like the Middle East/Africa and Latin America, but also wealthier parts of Europe (Brexit, anyone?) and the US (California wildfires, Colorado River drought, etc).  Many (most?) scientists believe climate change is anthropogenic, which is actually encouraging, because it means we can do something about itAstronomy as a science is highly relevant in this effort, because as we see more unprecedented extreme weather events, we can look for examples out beyond our home planet.  Climatologists have studied Venus, seeing what earth may look like when impacted by runaway greenhouse effect.  When we study Jupiter and Saturn, we can see gigantic permanent storms larger than the earth's diameter.



So we may not know where studying black holes will lead us.  But we're only scratching the surface now, and chances are, we will need that knowledge for our long-term survival.

Black hole "Gargantua" from Interstellar (2014)

Tuesday, April 23, 2019

Siri, what is survivorship bias?


So this pic went viral on Twitter today.  Aside from a misleading case of survivorship bias, it also completely ignores the big breaks that each founder caught.  Malcolm Gladwell even wrote an entire book about it, and it was so popular that even I read it.

Not saying we all could succeed "if only we had that rich uncle", but there's no need to belittle our own limitations; in most parts of the world, the economy is propelled by small businesses.

Thread below explains it well:

Saturday, March 30, 2019

What's really up with Venezuela?

"I personally believe that US Americans, like the Iraq, and South Africa, don't have maps"

I haven't written about what's happening in Venezuela, except for that time when I showed the John Oliver episode below (featuring a somehow-not-too-funny Wilmer Valderrama and a very sassy Popeye), or when John Bolton strangely pointed at Venezuela in his axis-of-evil-redux speech.  Despite my best effort, it's just annoyingly difficult to find an expansive writeup that doesn't just dwell on mistakes of recent past. So recently I read an excellent article on the crisis that not only gives nuanced historical context (beyond "people are eating rats because socialism") but also elaborates as to why we should pay attention to it.



So isn't Venezuela just a basket case of crazy people with ass-backwards ideology and no money? 

As usual, the answer is a bit more complicated.  The hometown of Simón Bolívar brewed a perfect storm, mixing a potent concoction of corruption and gross economic mismanagement in a monumental scale.  However, when we dig deeper, surprisingly certain key factors are wholly unrelated to the Chavismo ideology.

Dr. Nafeez Ahmed, former investigative journo for The Guardian, sees Venezuela as symptomatic of the end of the oil era. It's not that there's no more oil (remember "peak oil", from like ten years ago?); in fact the shale revolution in North America means there's "enough oil to fry the planet". It's just the economics of oil have been upended, and Venezuela's 32mn population is the first large-scale victim.  The country's crude production peaked in 1997 at 3.5mmbopd; over the last two decades, output continued to fall to just 1.0mmbopd in February, or 72% drop (!!), according to OPEC.

Looking back 50 years ago, Venezuela was a notable US ally with a dynamic and flourishing economy. As Latin America experts Moises Naim and Francisco Toro explain on Foreign Affairs:
"[1970s Venezuela boasted] a stronger social safety net than any of its neighbors and is making progress on its promise to deliver free health care and higher education to all its citizens. It is a model of social mobility and a magnet for immigrants from across Latin America and Europe. The press is free, and the political system is open; opposing parties compete fiercely in elections and regularly alternate power peacefully. It sidestepped the wave of military juntas that mired countries in dictatorship. Thanks to a long political alliance and deep trade and investment ties with the United States, it serves as the Latin American headquarters for a slew of multinational corporations. It has the best infrastructure in South America. It is still unmistakably a developing country, with its share of corruption, injustice, and dysfunction, but it is well ahead of other poor countries by almost any measure."

The 1973 OPEC oil embargo and the price shock brought wealth to Venezuela -- which by then was producing and exporting well over 3mmbopd -- but even then, technocrats saw plenty of red flags.  Oil minister (and OPEC co-founder) Juan Pablo Pérez Alfonzo presciently warned in a prophetic 1976 speech, "you will see, oil will bring us ruin... [oil] is the devil's excrement,"  foreseeing the pains that his country will suffer from.

Sure enough, crude prices normalized in the next decade, and the economy's rapid growth quickly came to a halt. Lower petroleum revenue meant cuts in public spending, scaled-down social programs, runaway inflation, a banking crisis, and mounting unemployment and hardship for the poor. The heavily indebted country faced currency devaluation and was forced to seek bailout from the now-infamous International Monetary Fund (IMF) in 1989. The lender imposed austerity that further crippled the economy and worsened everyday life.

Eventually this lead to the rise of Hugo Chávez, a populist demagogue who vowed to bring economic and social justice to the downtrodden, who lead an unsuccessful coup in 1992 and won presidency in 1998.  By then, the economy was limping along, as oil prices slumped to just $11, emptying the government coffers.  Chavez' brilliance was in mining discontent: he eloquently stirred public opinion against inequality, poverty and corruption of the political elite. For support, he turned to Cuban dictator Fidel Castro, offering oil (over 150,000 barrels/day at discounted prices -- over $1bn in value every year) in return for skilled professionals (brain drain was well underway) and political cover.

After Chavez' passing in 2013, his handpicked successor Nicolás Maduro deeply curtailed economic freedoms and erased all traces of liberalism from the country’s institutions. He expanded Chávez’s practice of jailing or exiling opposition leaders.  Other than Cuba, Maduro also deepened alliances with anti-Western regimes, turning to Russia for weapons, cybersecurity, and expertise in oil production; to China for financing and infrastructure; to Belarus for homebuilding; and to Iran for car production.

Fast forward to today: more than three million Venezuelans have fled the country (mostly towards Colombia and Brazil) in search of a better life as its once-robust oil industry collapsed, the bolivar currency loses value due to hyperinflation, and life savings were depleted.  Widespread shortage of food and medicines was inevitably followed by an unchecked wave of violent crimes including robberies and kidnappings.  In the last five years, real per capita income shrunk by 40%a peacetime decline that parallels those seen in recent wartime Iraq and Syria.  Just this month, the country's electrical grid failed, causing prolonged power and communication blackouts.  Fifteen dialysis patients died, and foods went stale due to the heat and lack of refrigeration.  Maduro, naturally, blames the blackouts on an "international cyber-attack" by the United States.

Although poverty, corruption and economic crises are quite common in South America’s various republics, Venezuela's sensational decline into a failed state “eclipses anything witnessed in decades”, according to British newspaper The Independent.

So what's really the culprit?

Source: Council of the Americas

Economics of Heavy Oil

Ahmed writes that while failed socialist experiments, corruption and neoliberal capitalism are all implicated in various ways, no one is talking about  how the world has shifted into a new era over the last decade or so. From largely drilling cheap, easy crude in the Middle East, we are now  dependent on "unconventional" fossil fuels that are much more difficult and expensive to produce. As a result, the highest cost producers have become increasingly unprofitable.

Venezuela's product is categorized as "heavy oil", a highly viscous liquid that requires unconventional techniques to extract and flow, often with heat from steam, and mixing with thinners or lighter forms of crude in the refining process. Heavy oil thus has a higher cost of extraction than normal crude, and a lower market price due to the refining difficulties. This isn't any fault of Venezuelans; it's just a fact of geology.  Where Venezuela is at fault, they don't even try to make production efficient: gas byproduct is flared instead of captured, where it can be (and is widely) used for power generation. 

When oil prices were at their peaks between 2005-2008, Venezuela was able to weather the inefficiencies and mismanagement in its oil industry due to much higher profits thanks to crude prices of US$$100-150/bbl. At today's US$60-70/bbl, the country's production becomes unprofitable and unsustainable.  Adding insult to injury, the Trump administration's August 2017 sanctions severely restricted national oil company PDVSA's access to financing, a difficult problem given Venezuela's highly-levered economy (110% debt-to-GDP).  Economist Fransisco Toro wrote that the sanctions made any dealing with Venezuela toxic, and slams the door shut to any Western diplomatic rapprochment to the Maduro regime.

This US policy greatly exacerbated the economic and humanitarian crisis; in fact, former UN rapporteur Alfred de Zayas criticized the US for engaging in “economic warfare”.  He declared that “sanctions are killing Venezuelans”, they fall most heavily on the poorest people in society, demonstrably cause death through famine and malnutrition, are aimed at illegally coercing "regime change", and lead to "crimes against humanity" under international law.

Climate Change


Pico Humboldt: 4,940m above sea level

Over the past two decades, Venezuela has experienced severe and persistent drought, including the 2013-16 period when rainfall was lower by 50-65% than the recorded historical average.  In 2016 water levels reached within five meters of a dead pool at the Guri Dam, the nation's largest hydroelectric facility (around 70% of the country's electricity is generated by hydropower), causing months of blackouts in and surrounding Caracas. This is caused by the El-Niño Southern Oscillation, the fluctuation in the climate system comprising a cycle of warm and cold sea-surface temperatures in the tropical Pacific Ocean -- a well-documented phenomenon going back to the 17th century -- which has increased in intensity due to climate change.  Piled on top of the devastating effects of the country's mismanagement, these shortages adversely affect agricultural output.

The country has also lost, or in the midst of losing, all of its glaciers, including its iconic Pico Humboldt at Merida, threatening an important source of freshwater.

Professor Juan Carlos Sanchez, Nobel laureate for his work with the Intergovernmental Panel on Climate Change (IPCC), says Venezuela is extremely susceptible to climate change because 75% of the population reside along coastal lines and unstable terrains, such as in the Zulia, Miranda, Carabobo and Aragua states. Throughout the 20th century, the average temperature in the country rose by up to 3°C, making these areas vulnerable to rising sea levels.  Short-term effects include increasing frequency of extreme weather events, like torrential rains, massive flooding and mudslides, droughts and hurricanes -- all of which we are already witnessing.  There are also alarming outbreaks of infectious diseases: vector-borne malaria, Zika, and dengue fever are up 400% over the last decade.  However, his long term predictions are ominous:
"Big parts of already-dry Falcon, Sucre, Lara and Zulia states, including the north of the Guajira peninsula, can expect desertification: the permanent degradation of the land and its capacity to carry crops, as a result of insufficient water. The pabellón criollo and even the iconic arepa are at risk: land degradation and decreased rainfall could make it difficult to impossible to grow corn, black beans and plantains in much of the country.  In general, water will become scarce in the coming decades as it will rain less over the country – in some regions up to 25% less than what they see today."

Warning to Humanity

When Ahmed underlines the rising cost of oil production, he isn't singling out Latin America.  Even in North America, where the energy industry is enjoying a renaissance at the Permian and Bakken fields, most of the companies have yet to show any profits whatsoever.  In fact, exploration activities are artificially sustained by the availability of cheap debt and private equity funding; market observers expect the bubble's burst is not so far away.

Of course, the cost cannot just be measured in US$ terms.

When we study the Venezuelan case, we begin to understand the impact of our civilization's addiction to fossil fuels and how it affects the Earth.  Very often, city dwellers and policymakers gobble up finite resources, demanding higher and higher amounts of energy in the name of "economic progress" without understanding its source and the toll that society pays to provide it.  Some may call it the "resource curse", or "paradox of the plenty".  Are renewables the solution?  Perhaps, or perhaps not, but at least it's time for the world to study and discuss the science in earnest, instead of stubbornly sticking to one's ideological grounds.

In Venezuela, we are seeing in real-time what happens when mother nature pushes a nation to its breaking point, to the brink of unraveling into a failed state.  If I am to offer one prediction: it won't be the last in our lifetime.