Selling Water & Energy To China

Here’s further proof, should it be needed, that the most cost-effective way to reduce the abysmal (and growing) gap in the distribution of income and wealth in the United States is to create a mechanism for the American working classes to produce hydrogen by electrolysis of seawater and sell it to China and other untapped similar markets. The outline of the plan is found here.

China has 22% of the world’s population but less than 10% of its arable land, and 1/5th of that is severely polluted.

China’s rainfall map (click to enlarge)

The western half (or more) of the country has little or no rainfall or surface bodies of water. Without water, cities cannot be built and agriculture is impossible. China will need to develop the arid west to feed its growing population, and the only way to do so is to bypass nature’s limitations and aquafacture water. If China (or any other country with similar needs) could switch from nuclear and fossil fuels to hydrogen to generate all its electricity, it could use the byproduct -an entirely new source of drought-proof pure water- to supplement the natural cycle and support growth.

On April 17, 2014 China’s Ministry of Environmental Protection issued a report, based on seven years’ worth of tests on 6.3 million Km2 (2.4 million Sq Mi) of land, that determined that 16% of the country’s soil is contaminated, with 1% heavily polluted. Major pollutants in the farmland include heavy metals such as cadmium and arsenic, and organic pollutants due to widespread pesticide use. Worse, southern China, where most of its rice is grown, is more polluted than the northern provinces. All told, 2.4% of the country’s arable land is too degraded for farming.

The importance of China’s sparsely populated west cannot be overstated. The land may be dry and fallow, but it is not polluted. If the American working classes could produce enough hydrogen to satisfy this untapped potential market, the resulting income stream might well rival the great river of wealth currently flowing to the shareholders and executives of multinational corporations. This alternative would not require internal redistribution of wealth by way of additional taxes.

The concept is not a secret, the cost-effective technology to produce hydrogen from electrolysis of seawater exists, and the desperation for water will only grow. Already heretofore great rivers no longer reach the sea, large bodies of water, such as the Aral Sea, have all but disappeared, and the full effect of global warming has yet to be felt. It’s no longer a question of if mankind will ever aquafacture water, but when. In the end, all it will take is some small country to start raking in the money, and everyone else will follow.

Water-vulnerable American Cities

This study at the Environmental Hydrology Laboratory at the University of Florida ranks 225 American cities with populations greater than 100,000 on fresh water availability and vulnerability.

For method details, see Padowski, J. C., and J. W. Jawitz, 2012. Water availability and vulnerability of 225 large cities in the United States, Water Resources Research, 48, W12529, doi:10.1029/2012WR012335.

Urban areas of population greater than 100,000 are ranked by fresh water availability based on liters per person per day. Absolute water availabilities have been normalized by scaling to the maximum value in the set. Vulnerability accounts for both mean water availability and variability about the mean (for example, drought frequency).

This method incorporates not only renewable water flows, but also the extracted, imported, and stored water that urban systems access through constructed infrastructure. These constructed sources represent important components of urban water supply, yet are typically excluded from water scarcity assessments. In this analysis, water availability is measured as the sum of the mean annual volume of water available to cities from both naturally-occurring and constructed sources. Natural availability is also constrained here by environmental limits on withdrawals. Urban water vulnerability is expressed as the susceptibility of those urban supplies under low-flow (drought-like) conditions.

High-ranking cities tend to be adjacent to very large lakes, such as the Great Lakes, and large rivers, such as the Mississippi or Columbia. For example, the highest-availability city (Duluth, MN) is the only US city on Lake Superior, the third-largest freshwater body in the world (by volume). The other Great Lakes have smaller volumes and are shared by more (and larger) cities. Low-ranking cities are often found in arid regions (for example Los Angeles and Las Vegas), have low storage per capita (for example Miami and Atlanta) or share sources with multiple other cities (for example Chicago and Tallahassee). This national, cross-cutting assessment required several assumptions for cases where limited data regarding source characterization or allocation exist (for example cities sharing the Great Lakes or large aquifers). Therefore, the current vulnerability assessments for an individual city should be considered in the context of the data available for each city. Population data in the table below are from the 2000 US Census.

College and the Middle Class

Student Debt

The zip code effect

Comparative resources to pay for higher education

Contrary to what some have been led to believe, a college education is not a panacea, only a distraction from the real reasons for our predicament. The fact is, even if colleges and universities wanted to accept each and every high school graduate, they do not have the physical capacity to do so. And even if they could, and did accept them, the nation would still need farmers, carpenters, plumbers, electricians, mechanics and cops, among others, many of whom are chronically unemployed or underemployed. A large, healthy middle class is absolutely essential to any society, and that means wages high enough to own a modest house in a safe neighborhood, to raise kids and pay for their education, to save for retirement, and to have enough disposable income to make their lives worth living. These are not the outrageous, intolerable expectations of the 47% of the population accused of demanding government entitlements and not paying taxes; not long ago they were the American norm and the envy of the world.

The Labor Participation Rate

As of March 2013, the percentage of working-age adults in the labor force -known as the participation rate- fell to 63.3%, the lowest since May 1979. Since unemployed people who stop looking for work are not counted as unemployed, the official unemployment rate is grossly understated. Part of the trend can be explained by the baby boom generation’s gradual retirement, but that does not consider the fact that many boomers who need to work, can’t; they simply retire to a life of abject poverty. One reason so many people -of all ages, not just boomers- can’t find well-paying jobs is because manufacturing wages have declined over time.

China’s Achievements

In less than two generations, without vast oil reserves or mountains of debt, China has peacefully transformed itself into the world’s preeminent manufacturing powerhouse, and for that it deserves the highest praise and admiration. America’s trade deficit with it stems in part from China’s lower labor and medical care costs, its Confucian culture of self-sufficiency, and its well defined and scrupulously enforced policy of currency manipulation. But the most important reason for the size and longevity of the deficit is China’s anemic consumption of consumer goods manufactured in the United States by American workers, a situation reminiscent of the period that preceded the Opium Wars. There is of course an important difference between then and now: China is no longer economically or militarily weak, and it is using its hard currency reserves -the world’s largest- to acquire wealth-creating assets worldwide, even in the United States. While China does not have a reputation for seeking to expand beyond what it considers its historical sphere of influence, it is also true that never has it depended so much on so many others for its economy’s lifeblood -energy and raw materials.

There’s no indication that any of this is about to change, to the contrary. The need to survive and the irresistible lure of its millions of potential customers will continue to entice American and European businesses to invest in China. Those with the means to do so will profit at an increasing rate. The rest, -who lack the capital and mobility of their ex-bosses- are and will continue to be barred from the great river of wealth emanating from China’s booming economy, condemned instead to meager jobs selling the same foreign-made goods they once manufactured. It doesn’t take rocket science to extrapolate what the distribution of wealth will look like in another generation -with all its consequences- if remedial action is not taken now, immediately, to rescue the increasingly vestigial American middle class.

Public Debt

Currently the only way the government can maintain its liquidity is thanks to the Federal Reserve, which as of April 2013 holds 16% of total outstanding Treasuries -essentially Federal IOUs purchased by the Fed with money created out of thin air. How long this can continue is anyone’s guess.

Trade Deficit

Trade Deficit 1970-2012
Source: U.S. Census Bureau, Foreign Trade Division

The trade deficit is a direct consequence of the fact that more workers in other nations are employed producing goods and services for the United States than the other way around. So far, this wealth hemorrhage has been confined to the middle class, compelled to choose between unemployment and underemployment. But that is economically, politically and socially unsustainable; the massive, ongoing loss of well-paying middle class jobs that began in the 1970s has resulted in a dismal labor participation rate, 63.3% in April 2013. Worse, more than 50% of the jobs created in the same month were in low-paying industries such as retail trade (29,000) and leisure and hospitality (38,000). The writing is on the wall: in 2012, 284,000 college graduates had jobs that paid minimum wage, a 70% increase over the previous decade (Wall Street Journal, March 30, 2013). Presumably, those without college degrees were pushed deeper into the abyss of unemployment, underemployment and despair. No wonder the drug trade has so many eager participants. Furthermore, lower wages mean lower tax revenue and fewer dollars to offset China’s growing defense expenditures as a percent of its economy.

Drought

It’s easy to loose sight of how our normal activities of daily living impact the environment on which we all depend for our livelihood. But they do –profoundly.

The environment is being over exploited, and it shows: climate change, pollution, fresh water depletion, declining food production, deforestation, and ocean over-fishing, among other things, threaten to plunge nuclear-armed humanity into a deadly struggle for control of vital resources.

Thousands of years ago someone realized that growing food was far easier and efficient than hunting and gathering, and sedentary civilizations began to appear near springs, rivers and other bodies of water. Today, our knowledge of agriculture has progressed to a science. But when it comes to water, not much has changed since the Bronze Age. While our technology is superior by several orders of magnitude –pumps and electricity- we still depend on natural precipitation, which we do not control, to replenish our rivers, lakes, aquifers and reservoirs.

That will not suffice. Over the next 40 years demand for fresh water will rise 50%, demand for energy will nearly double, and, according to the Food and Agriculture Organization of the United Nations, by 2050 humanity will need to grow 70% more food than today to feed itself. Already nearly 70% of the fresh water humanity uses goes to irrigation; where will the additional water come from?

We are draining rivers, lakes and aquifers at an unsustainable rate. The Ogallala Aquifer beneath the high plains, used to irrigate 27% of the farmland in the United States, is dropping three feet per year; at that rate it will run dry before the end of this century, perhaps sooner. In India, the Indus River Valley Aquifer is being drained at a rate of 20 cubic kilometers a year, and the North China Plain Aquifer, the main source of water for fields feeding millions, is dropping at a rate of 10 feet per year. Drought has taken its toll even on the mighty Amazon, and the great rainforest is dying at an alarming rate. The Colorado River and the Yellow River in China no longer reach the sea, and central Asian rivers, which once fed the Aral Sea, have been drained to the point that it is now a salty dry lake bed.

Distribution of Wealth

There’s a rapidly widening gap in the distribution of income and wealth. The latest census data depict a collapsing middle class (this video details how it happened and its ramifications), high underemployment, low (and declining) labor participation, and rising outlays for disability, food stamps and low-income tax credits. Alarming as they are, the statistics do not include the 97.3 million low-income Americans -defined as those earning between 100 and 199 percent of the poverty level- who are considered too rich to qualify for government assistance. Thus, together with the 49.1 million who fall below the poverty line, the poor number 146.4 million, or roughly 48 percent of the U.S. population. Broken down by race and ethnicity, Hispanics top the list at 73 percent, followed by blacks, Asians, and non-Hispanic whites. States in the South and West have the highest percentage of low-income families, particularly Arizona, New Mexico and South Carolina; however, by raw numbers most are in California and Texas.

The last time the gap between rich and poor approached today’s alarming level was in the years just before the Great Depression, a bygone era when American workers were insulated from quasi-slave foreign labor, the Federal Government’s debt as a percent of gross domestic product (GDP) was but a fraction of what it is today, the trade deficit with China simply did not exist, and the U.S. was a net oil exporter. The result: the wealthiest 1 percent of the population have amassed 225 times the wealth of the typical American.

The gap is a consequence of a massive, continuing disinvestment in America. Since 1970 millions of high-paying manufacturing jobs were relocated or outsourced, and there’s no reason to believe they’ll ever come back. That is a recipe for disaster. Thousands of college graduates, unable to find employment in their fields of expertise, may find it impossible to support themselves and pay their non-dischargeable student loans.

The purpose of presenting these facts is not to imply, infer or suggest that a redistribution of existing wealth by radical means will work. On the contrary, any solution to this complex, vital problem should focus on the creation of an imperceptible mechanism to divert a greater percentage of future wealth to the middle class. That would improve the purchasing power of American consumers and strengthen our democracy.

Gridlock

Gridlock is a philosophical and emotional reaction to internal demographic, economic and social changes of unprecedented magnitude and scope. Simply stated, it is the quintessential conflict between the irresistible force -change- and the immovable object -status quo. While gridlock is not the cause of the aforementioned problems, it does deprive the government of the support it needs to address them. Ominously, history is replete with nations and empires that succumbed to procrastination and political necrosis.

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