Given the laws of physics, can the Tesla Semi really go 500 miles, and what will the price be?

Preface: Most people think that electric truck makers need to tell us the specs — the battery kWh, price, performance, and so on — before we can possibly know anything about their truck.

But that’s simply not true.  We know what lithium-ion batteries are capable of. And we know the kWh, size, and weight of the battery needed to move a truck of given weight a certain number of miles.  That makes it possible for scientists to work backwards and figure out how many kWh the battery would need to be to go 300 to 500 miles, what it would weigh, and the likely price for the battery needed for a truck at the maximum road limit of 80,000 pounds.

S. Sripad and V. Viswanathan (2017) at Carnegie Mellon have done just that.  They published a paper in the peer-reviewed American Chemical Society Letters at the following link: Performance metrics required of next-generation batteries to make a practical electric semi truck.  Below is my review of their paper along with some additional cited observations of my own.

 — Alice Friedemann   www.energyskeptic.com  author of “When Trucks Stop Running: Energy and the Future of Transportation”, 2015, Springer and “Crunch! Whole Grain Artisan Chips and Crackers”. Podcasts: Derrick Jensen, Practical Prepping, KunstlerCast 253, KunstlerCast278, Peak Prosperity , XX2 report

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Authors S. Sripad and V. Viswanathan felt compelled to write their paper because there are so many guesstimates of the likely cost and performance of an electric class 8 semi-truck in the media. But these hasty calculations don’t take into account critical factors like the specific energy density of the battery pack, vehicle weight, drag, rolling resistance, battery kwH to go a given distance, and weight of the batteries given current Li-ion battery technology.

The average class 8 truck, empty, weighs around 31,000 to 37,000 pounds. The tractor (the cab in front) weighs around 17,000 to 20,000 pounds.  If you subtract 4,000 pounds of power-train weight (diesel engine, cooling system, transmission, and accessories), the cab of the truck, where the driver sits, is about 13,000 to 17,000 pounds.

The authors agree: they estimate “the average empty truck weight is 6,000 to 8,000 kg (13,228 to 17,637 pounds) without the weight of the engine”.  They also imply that the empty truck weighs 13 to 17,000 pounds later on when they point out that the battery for a 600 mile range would weigh 18 tons (36,000 pounds), “twice as much as the empty vehicle”.

But oops!  They forgot to add on the weight of the empty container and chassis where the payload is.  That adds another 16,000 pounds (8,000 pound empty 40 foot container, 8,000 to 10,000 pound trailer, i.e. chassis). So my weight estimate of 29,000 pounds is closer to what a class 8 electric truck will weigh.

This is why my estimates of payload are always about 10,000 pounds less than the authors. Authors: 900 miles payload of 8,000 pounds, my payload minus 3,000 (it’s overweight by 3,000 pounds). Authors 600 miles payload of 24,000 pounds, my payload 15,000 pounds. Authors: 300 miles payload 44,000 pounds, my payload 33,000 pounds.

If the authors are also using the average payload, which is 75% of the maximum payload, which is what I use, that would further explain the difference. I think the maximum should be used because in the future, both electricity and diesel are likely to be more expensive, or even rationed.  To maximize efficiency businesses will have to stop just-in-time delivery with half full trucks, and turn to full loads and inventories to stay in business.  And a lot less packaging so products don’t “cube out”, fill up the truck before a maximum weight can be achieved.

Nor can electric trucks be made lighter with aluminum or carbon fiber. They’re too expensive. Unlike cars, where the average income of an electric car buyer is $148,158 (NRC 2015), and the amount of aluminum needed to light-weight the car is a small fraction of what a truck would require, the trucking industry is a cut throat business with razor thin profits.  Light-weighting is out of the question.

The maximum weight of a truck allowed on the road is 80,000 pounds, so if the body weight of a diesel truck is the minimum 33,000 pounds, then the maximum amount of cargo that can be carried by a diesel truck is 47,000 pounds.

Since an electric truck weighs 4,000 pounds less, that ought to shoot up to 51,000 payloads.  But it doesn’t because the battery packs weigh so much.

For example, the authors found that the weight of the battery pack needed for a truck to go 900 miles is 54,000 pounds. There goes the payload: 54,000 + 29,000 truck weight is 83,000 pounds, over the 80,000 pound road limit. And this truck that can not haul cargo will set you back $500,000 to $650,000 dollars for the battery alone.

A 600 mile range isn’t commercial either. For starters, the battery pack would cost $320,000 to $420,000 dollars, and on top of that you’ll need add another $100,000 for the body of the truck. To move a truck 600 miles requires a 36,000 pound battery + 29,000 pound truck weight and the truck can only carry 15,000 pounds, which is 32,000 pounds less than a diesel truck can carry.

Musk claims the range of the Tesla semi truck can be as much as 500 miles.  Based on the figures in Table 1, that means the battery would cost $267,000 to $350,000 (also add on $100,000 for the truck body), and the battery will weigh 30,000 pounds + 29,000 pound truck weight and be able to carry only 21,000 pounds of cargo, which is 26,000 pounds less than a diesel truck.

Even if the range is on the low end of 300 miles, the battery will still be very heavy, with a battery weight of 18,000 pounds + 29,000 pounds truck weight and and only be able to carry 33,000 pounds of cargo, which is 14,000 pounds less than a diesel truck.

The bottom line according to the authors, is that a 600 to 900 mile range truck will use most or all of their battery power to move the battery itself, not the cargo. The cost of the battery is $160,000 to $210,000 plus $100,000 for the truck cab and trailer (minus powertrain), so overall $260,000 to $310,000, which is $140,00 to $190,000 more than a new $120,000 diesel truck and considerably more than used diesel class 8 truck, which can cost as little as $3,000.

If anyone in the trucking industry is reading this, I’d like to know if a 300 mile range with just 18,000 pounds of cargo is acceptable.  I suspect the answer is no, because the Port of Los Angeles explored the concept of using an all-electric battery drayage (short-haul) truck to transfer freight between the port and warehouses, but rejected these trucks because the 350 kWh battery weighed 7,700 pounds and reduced cargo payload too much. Nor was the 12 hours or more to recharge the battery acceptable. Ultra-fast 30 min recharging was considered too risky since this might reduce battery lifespan, and bearing the cost of replacing these expensive batteries was out of the question (Calstart 2013).

Even if a way has been found to charge a truck in half an hour without reducing battery life, the amount of power needed to do that is huge, so new transmission, voltage lines, upgrading many substations with more powerful transformers, and new natural gas generating power plants will need to be constructed.  Across the nation that’s many billion dollars.  Who will pay for that?

It shouldn’t be surprising that a truck battery would weigh so much.  Car batteries simply don’t scale up — they make trucks too heavy.  The authors calculated that a 900 mile electric class 8 truck would require a battery pack 31 times the size and weight of a 100 kWh Tesla Model S car not only because of weight, but all the other factors mentioned above (aerodynamics, rolling resistance, etc).

If the Tesla Semi or any other truck maker’s prototype performs better than this, there are additional questions to ask.  For example, new diesel trucks today get 7 miles per gallon. But the U.S. Super Truck program has built trucks that get an amazing 12 mpg. But those trucks are not being made commercially.  I don’t know why, but it could be because this achievement was done by making the prototype truck with very light weight expensive materials like carbon fiber or aluminum, costly tires with less rolling resistance, and other expensive improvements that were too expensive to be commercial.

Performance can also be gamed – a diesel truck going downhill or on level ground, with less than the maximum cargo weight, going less than 45 miles per hour with an expert driver who seldom brakes, can probably get 12 mpg even though they’re not driving a Super Truck.

Who’s going to buy the Tesla Semi, Cummins EOS, Daimler E-FUSO, or BYD all-electric semi-trucks?

Most trucking companies are very small and can’t afford to buy expensive trucks: 97% of the 1.3 million trucking companies in the U.S. own 20 trucks or less, 91% have six or fewer. They simply aren’t going to buy an electric truck that costs roughly 2.5 times more than a diesel truck, carries half the weight, just 300 miles (diesel trucks can go 1,800 miles before refueling).

Nor will larger, wealthier trucking companies be willing to invest in electric trucks until the  government pays for and builds the necessary charging stations. This is highly unlikely given there’s no infrastructure plan (Jenkins 2017), nor likely the money to execute one, given the current reverse Robin Hood “tax reform” plan. With less money to spend on infrastructure, charging stations might not even be on the list.

The big companies that have bought (hybrid) electric class 4 to 6 trucks so far only did so because local, state, and federal subsidies made up the difference between the cost of a diesel and (hybrid) electric truck.  The same will likely be true of any company that makes class 8 long-haul trucks.

I constructed Table 1 to summarize the averages of figure 2 in this paper, which has the estimated ranges of required battery pack sizes, weights, cost, and payload capacities of a 300, 600, or 900 mile truck.

Range (miles) Battery kWh required Battery Pack Cost at $160-$210 per kWh Battery Weight kg / tons Max Payload
300 1,000 $160 – 210,000   8,200 /   9 8.5
600 2,000 $320 – 420,000 16,000 / 18 5.5
900 3,100 $500 – 650,000 24,500 / 27 0

Table 1. All electric truck data from figure 2 of Sripad (2017).   A diesel truck Max payload is 23.5 tons.  The max payload (cargo weight) is derived from the max truck road weight of 40 tons, minus battery weight, minus weight of the truck (17.5 tons).

As to whether the Tesla Semi will perform as well as Elon Musk says, it is not certain he will still be in business in 2019, because Musk and other electric car makers are competing for very few potential electric car buyers and with each other as well. There will never be enough electric car buyers because of the distribution of wealth. Sixty-nine percent of the United States population has less than $1,000 in savings (McCarthy 2016). At best the top 10% can afford an electric car, but many of them don’t want an electric car, don’t have a garage, prefer Lyft or mass transit, are saving to buy a house or survive the next financial crash.  And if states or the Trump administration end subsidies that will further dent sales.

Nor will there ever be completely automated cars or trucks, because unlike airplanes, where pilots have 8 minutes of grace before the crash to go back to manual controls, there is only a second for a car or truck driver to notice that an accident is about to occur and override the system.  The better the system is automated, the less likely the driver is to even be paying attention.  So the idea that the poor bottom 90% can order an automated electric car to their doorstep isn’t going to happen.  Nor can it happen with a driver – there is simply too little time to notice and react.

Just imagine if an automatic truck were hacked or malfunctioned, it would be like an attack missile with that much weight and momentum behind it.

Even if the Tesla semi’s are built in 2019, we won’t know until 2024 if charging in just half an hour, cold weather, and thousands of miles driven reduces driving range and battery life, if the battery can withstand the rough ride of roads, and be certain that lithium is still cheap and easily available.

The only thing going for the Tesla Semi is that electricity is cheap, for now.  But at some point finite natural gas will begin to decline and become very expensive, even potentially unaffordable for the bottom 90%.  As gas decline exponentially continues, all the solar and wind power in the world does no good because the electric grid requires natural gas to balance their intermittent power. There is no other kind of energy storage in sight.  Utility-scale batteries are far from commercial.  Although compressed air energy storage and pumped hydro storage dams are commercial, there are so few places to put these expensive alternatives that they can make little, if any meaningful contribution, ever.

Meanwhile, this hoopla may drive Musk’s stock up and distract from his lack of meeting the Model 3 goals, but investors have limited patience, and Musk has over $5 billion in debt to pay back.  It may be that Elon Musk is banking on government subsidies, like the $9 million State of California award to the BYD company for 27 electric trucks — $333,000 per truck (ARB 2016), and the Ports of Los Angeles and San Pedro who will subsidize a zero emission truck that can go at least 200 miles.

References

ARB. 2016. State to award $9 million for zero-emission trucks at two rail yards, one freight transfer yard in Southern California. California Air Resources Board.

Calstart. 2013. I-710 project zero-emission truck commercialization study. Calstart for Los Angeles County Metropolitan Transportation Authority. 4.7

Jenkins, A. 2017. Will anybody actually use Tesla’s electric semi truck? Fortune.

McCarthy, N. September 23, 2016. Survey: 69% Of Americans Have Less Than $1,000 In Savings. Forbes.

NRC. 2015. Overcoming barriers to deployment of plug-in electric vehicles. Washington, DC: National Academies Press.

Sripad, S.; Viswanathan, V. 2017. Performance metrics required of next-generation batteries to make a practical electric semi truck.  ACS Energy Letters 2: 1669-1673.

Vartabedian, M. 2017. Exclusive: Tesla’s long-haul electric truck aims for 200 to 300 miles on a charge. Reuters.

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Overview of the renewable fuel standard, U.S. House hearing 2013

House 113-61. June 26, 2013. Overview of the renewable fuel standard: Government perspectives. House of Representatives.

[Excerpts from the 104 page transcript follow]

Key points:

  • The implicit premise that cellulosic and other advanced biofuels would be available in significant quantities at reasonable costs within 5 to 10 years following adoption of the 2007 targets has not been borne out.
  • Ethanol faces some major demand and distribution system challenges that make it difficult to increase its use as a motor fuel.  Since gasoline usage has declined the past 5 years, there is less need for ethanol, not more, making it unlikely E-15 can be justified.
  • Feed grain prices have helped net cash income for row crop producers, but have raised feed costs and lowered profit margins for livestock, dairy and poultry producers. Feed costs make up 51% of expenses for dairy, 19% for beef cattle, 42% for hogs, and 35% for poultry
  • We have seen the expansion of corn ethanol increase corn prices by 36 percent from 2000 to 2009. CBO estimated that the use of ethanol for fuel accounted for about a 28 to 47 increase in the price of corn and a 10 to 15 percent increase in food prices. And it is important to note that these increases occurred during a time when the U.S. harvested a record 13.1 billion bushels of corn.
  • There are about 11 million flex-fuel vehicles on the road but consumers are not using them to buy E85. Only 100 million gallons of E85 were sold last year, because some owners don’t know they have got a flex-fuel vehicle, or live in states with few E85 stations (Texas has just one), or are reluctant to pay the high E85 price.

ED WHITFIELD, KENTUCKY: The topic of today’s hearing is an ‘‘Overview of the Renewable Fuel Standard: Government Perspectives.’’ As you know, this is one of those issues where we have a lot of different viewpoints on this important issue. And we have not really revisited the Renewable Fuel Standard since it was last expanded in 2007.

We have learned firsthand how the RFS implementation would be affected by drought that reduced corn yields, that occurred last summer.

Perhaps the biggest unexpected development has been the decline in gasoline usage over that past 5 years. As a result, we are facing the challenge of mixing the specified volumes of renewable fuels into a significantly smaller pool of gasoline. This has led to a number of issues we will address today, including the so-called blend wall and the approval of E–15. We have also learned, first hand, how the RFS implementation would be affected by a drought that reduced corn yields, as occurred last summer.

Mr. BARTON. The current law, as it is, is unworkable and unsustainable, and I support total and full repeal. I think it has outlived its usefulness.

BOBBY L. RUSH, ILLINOIS: Members of both sides of the aisle touted the potential benefits of enacting a Renewable Fuel Standard, which included reducing U.S. dependence on oil, enhancing energy security, bolstering the agricultural economy, and addressing the challenges of climate change by reducing greenhouse gas emissions from the transportation sector. Today, I believe the RFS has been successful in meeting each of these objectives while also helping to drive job creation and economic investment.

HENRY A. WAXMAN, CALIFORNIA. As long as our transportation system relies exclusively on fossil fuels, we will continue to make climate change worse. Fuel efficiency alone will not achieve the 80 percent reduction in climate pollution that we need by 2050 to avoid catastrophic climate change.

The shift to hybrids and electric vehicles is a big part of the solution. But low-carbon renewable fuels can also contribute significantly. And for some transportation sectors, such as aviation and shipping, low-carbon liquid fuels are the only option, besides efficiency.

But the RFS is not without flaws. As our gasoline consumption goes down and the renewable fuel mandates increase, we could reach the blend wall where adding more ethanol to the fuel supply could damage some engines. Drop-in biofuels offers one solution, but they are still being developed.

Mr. SIEMINSKI, EIA. The RFS program is not projected to come close to achieving the legislated target of 36 billion gallons of renewable motor fuels by 2022. Substantially increasing the use of biofuels can only occur in forms other than the low-percentage blends of ethanol and biodiesel that account for nearly all of their current use. Of the potential alternative pathways—one, increased use of higher ethanol blends; two, the advent of drop-in biofuels; or three, the development of compatible renewable fuel components such as biobutanol—of those, so far none have achieved a significant market role. The implicit premise that cellulosic and other advanced biofuels would be available in significant quantities at reasonable costs within 5 to 10 years following adoption of the 2007 targets has not been borne out.

Ethanol potentially has three distinct roles in motor fuels markets: one, as an octane source; two, as a volume enhancer; and three, as a provider of energy content. So an important behavioral question arises with the use of higher percentage blends, such as E15 and E85, and that is whether the shorter range provided by a tankful of fuel due to ethanol’s lower energy content per gallon will affect consumers’ buying decisions. In Brazil, where a high percentage of ethanol fuels are sold, consumers do indeed consider energy content pricing rather than simply buying the cheapest fuel.

Ethanol faces some major demand and distribution system challenges that make it difficult to increase its use as a motor fuel regardless of its source. Although the use of E15 in model year 2001 and newer light-duty vehicles is now allowed, very few gasoline retailers offer it out of concerns related to automobile warranties, potential liability for misfueling, infrastructure costs, and consumer acceptance. Ethanol blends above 15 percent, E85, are more widely available but can only be used in flex-fuel vehicles, which make up only about 5 percent of the light-duty fleet.

The complexity of refined product markets, of which biofuels are an important part, has led to a growing number of requests for EIA analysis. Last fall, we published a report, ‘‘Biofuels Issues and Trends’’—it is attached to my testimony—to provide an overview of the dynamics of production, consumption, trade in ethanol, biodiesel, and cellulosic fuels. We also hold regular workshops to solicit feedback on a variety of these subjects.

(For purposes of this figure and this testimony, RFS projections are discussed in terms of RFS credits, since biofuels receive credit towards the RFS targets on the basis of their energy content relative to ethanol rather than on a strict volumetric basis. For example, each gallon of biodiesel provides approximately 1.5 credits towards the overall RFS target.)

The RFS targets enacted in 2007 cannot be approached through the current low-percentage blending of ethanol and biodiesel into motor fuels. There are three potential alternative pathways (1) Increased use of higher ethanol blends, (2) the advent of drop-in biofuels, such as renewable gasoline or renewable diesel, that can be used as direct replacements for their petroleum-based counterparts, and (3) the development and use of new renewable fuel components, such as biobutanol, that might be more easily blended in increased volumes. To date, none of these options has achieved a significant market role.

The AE02013 Reference case projections assume continuing technology progress and cost reduction, but they do not assume any breakthroughs in transformational biofuels technologies, such as low-cost, scalable, algae biofuels.

Ethanol faces some major demand and distribution system challenges that make it difficult to increase its use as a motor fuel regardless of its source. While much of the wholesale distribution infrastructure is capable of handling ethanol, which to date has been moved by rail rather than pipelines, significant changes in the retail infrastructure would be needed to carry higher-ethanol blends of motor gasoline. The AE02013 Reference case anticipates some penetration of both E15 and E85, but not nearly enough to approach the legislated RF5 target. Although EPA has granted waivers allowing the use of E15 in model year 2001 and newer light-duty vehicles, very few gasoline retailers currently offer E15 for sale to the public due to concerns related to automobile warranties, potential liability for misfueling, infrastructure costs, and consumer acceptance. Also, E15 does not qualify for the one pound Reid Vapor Pressure (RVP) waiver that was legislated for ElO, so it would not be an environmentally compliant fuel in summer months when made using most current gasoline blend stocks. E85 is more widely available at retail fuel stations, but can only be used in designated flex-fuel vehicles (FFVs). Currently, there are about 11.5 million FFVs in use, about 5.1 percent of the overall light duty vehicle fleet. Manufacturers built flex fuel capability into these vehicles in order to receive credits towards compliance with fuel economy standards under provisions that are being phased out under the implementation offuture Corporate Average Fuel Economy (CAFE) and greenhouse gas emissions standards promulgated by the National Highway Traffic and Safety Administration (NHTSA) and the EPA.

Without vehicle manufacturer incentives to produce additional FFVs and absent a strong consumer demand for them, which will depend on consistent E85 pricing that at least reflects its lower energy content, the potential for growth in the E85 will remain limited.

The present challenges facing the RFS program are reflected in the value of Renewable Identification Numbers (RINs) that are used by EPA to implement the RFS. EPA has created several different varieties of RINs that correspond to the nested targets for different categories of biofuels in the RFS. The price of RINs which can only be used to satisfy the total RFS mandate (06 RINs) hovered close to zero through 2012, as the use of ethanol as an octane enhancer and volume enhancer, as previously discussed in my testimony, was more than sufficient for obligated parties to comply with the RFS program. Early this year, 06 RIN prices rose dramatically as the market reflected on the difficulty in meeting a rising RFS target given the difficulty of accommodating additional ethanol volumes within ElO gasoline. Since mid-March, the price of 06 (ethanol) RINs has closely tracked the price of 04 (biodiesel) RINs that can be used to meet the RFS targets for advanced biofuels and biodiesel as well as the overall target. The increase in the 06 RIN price provides an economic incentive for two changes in the market. First, a higher 06 RIN price tends to lower the cost of E85 gasoline relative to HO gasoline. Second, a 06 RIN price equal to or near the biodiesel RIN price may motivate blending of biodiesel that exceeds the biodiesel blending requirements that EPA announced in its proposed rulemaking for the 2013 RF5 program that has yet to be finalized. At the retail level, EIA expects diesel fuel prices to be most affected by higher RIN prices as typical biodiesel blending yields only about one-third ofthe RINs required and diesel fuel refiners who are obligated parties under the RFS program must make up for the shortfall by purchasing the now higher-priced RINs.

Over the last year, EIA held two workshops to engage the professional and academic communities on issues relating to biofuels projections. In August 2012, EIA held a workshop on advanced biofuels, which brought together around 90 representatives from government, national labs, research institutions, commercial biofuels producers, universities, non-profit organizations, and investment firms, so that they could share with us some of the opportunities and challenges of commercializing advanced biofuels technologies.

In March, we hosted a second workshop attended by over 200 people, over half via a live internet feed, to discuss results and solicit feedback on a variety of biofuels-related topics in preparation for future analysis.

CHRISTOPHER GRUNDLER. Although both ethanol and non-ethanol biofuels can be used to meet the RFS, ethanol has and will likely continue to be the predominant renewable fuel on the market for the foreseeable future.

As the statutory volume requirements of the RFS program increase, it becomes more likely that the volume of ethanol projected to meet those requirements will exceed the volume that can be consumed in the common blend of 10 percent ethanol and 90 percent gasoline, referred to as E10. Additional volume of ethanol would then need to be used at higher blend levels, such as E15 or E85, or significant volumes of non- ethanol would be needed to meet the targets. As a result, to the extent that ethanol is likely to be used to meet RFS volume requirements, the volume of ethanol that can be legally and practically consumed is a limiting factor in meeting the statutory volumes. This is commonly known as the blend wall.

JOSEPH GLAUBER. Corn ethanol production increased dramatically over the past decade from just over 2 billion gallons in 2002 to almost 14 billion gallons in 2011. Driven by favorable market forces and encouraged by government biofuel policies, including the RFS, that increase has spurred corn production and corn use for ethanol and has been a factor in the recent grain price boom and overall improvement in farm balance sheets, including record farm incomes over the past few years. This boom has not been shared equally by all segments of the ag sector, however. Livestock, dairy, and poultry producers have faced tighter margins due to higher feed costs.

The decline in corn use for feed has been partially offset by the increased availability of protein feeds, such as distillers’ dried grains, a co-product of the dry milling process. Nearly one-third of a bushel of corn used for ethanol production is returned in the form of DDGs.

The decline in U.S. Corn exports have been offset in world markets by increased exports from foreign suppliers, principally Brazil. Over the years 2000 to 2005, the U.S. exported on average 1.9 billion bushels of corn and accounted for about 60 percent of total world corn exports. By 2011/2012, U.S. corn exports had fallen to 1.5 billion bushels and accounted for 37 percent of total world exports. With drought-related reduced supplies in 2012/2013, U.S. corn exports are projected to fall to 700 million bushels, less than 20 percent of total world exports. U.S. corn exports are projected to recover to 1.3 billion bushels in 2013/2014, but they are projected to account for about a third of total world exports.

By contrast, livestock, dairy, and poultry producers have faced more uneven, in some cases declining returns since 2006. In general, higher feed grain prices have helped net cash income for row crop producers, but have also raised feed costs at lowered profit margins for livestock, dairy, and poultry producers. Feed costs make up about 51 percent of expenses for dairy, 19 percent for beef cattle, and 42 percent for hogs, and 35 percent for poultry farm business. Price-feed rations for most species show a decline throughout most of the period since 2006. Looking forward, increases in demand for corn to produce ethanol are expected to slow due to constraints on domestic ethanol consumption—as has been mentioned previous here, the so-called blend wall—increases in blending efficiency, and nearing the 15 billion gallon cap on conventional ethanol in the RFS, and finally, due to increased supply of ethanol from other feedstocks. Those will mitigate pressures on corn prices.

Com feed and residual disappearance declined by 26 percent from marketing year 2005/06 to 2011/12 while com exports declined by 28% over the same period. However, the decline in com use for feed has been partially offset by the increased availability of protein feeds such as distillers’ dried grains (DDGs), a co-product of the ethanol dry milling process. Nearly one-third of a bushel of com used for ethanol production is returned in the form of DDGs. The decline in U.S. com exports have been offset in world markets by increased exports from foreign suppliers, principally Brazil (see figure 4). Over (the trade marketing) years 2000/01 to 2005/06, the United States exported, on average, 47.8 million metric tons of com (1.9 billion bushels) and accounted for over 60 percent of total world com exports. By 2011112, U.S. com exports had fallen to 38.4 million tons and accounted for 37 percent of total world exports. With drought reduced supplies in 2012/13, U.S. com exports are expected to fall to 18.5 million tons, less than 20 percent of total world exports, and while U.S. com exports are projected to recover to 33 million tons in 2013114, they are projected to account for only 32 percent of total world exports.

Agricultural prices declined in real terms (that is, adjusting for inflation) throughout most of the 50 or so years following the end of World War II (see figure 5) reflecting strong gains in agricultural productivity over the period. Prices began to increase in real terms around 2000 with increasing population growth, rapid economic expansion in developing countries, and rising per capita meat consumption globally along with rising energy prices (see Trostle 2008). Those factors coupled with the rapid expansion of ethanol production following the phase out of MTBE 5 increased demand for com, for conversion into ethanol and for animal feed and pushed prices for com higher (see Collins 2006). Prices spiked in 2007/08, in 2010/11, and most recently in 2012 as supply shortfalls coupled with strong global demand saw inventory levels for major grains and oil seeds fall to low levels. Some studies suggested that the main factor for those spikes was increased ethanol production. For example, Mitchell (2008) attributed almost 75 percent of the increase in commodity prices during the 2007/08 price spike to the increase in biofuel production. Studies also examined whether com demand for ethanol production is less price responsive (under current economic and policy conditions), compared to other uses such as feed use or to meet export demand, which could exacerbate price volatility, particularly when stock levels are low (see for example Collins, 2006 and Wright, 2010).

More recently, the increase in U.S. ethanol production was estimated to account for about 36 percent of the increase in com prices over the period from 2006 to 2009 (see Babcock and Fabiosa 2011). More recent studies have found similar results (see recent reviews of econometric analyses of the impact of ethanol on corn prices can be found in Condon et al. 2013 and Hochman et al. 2013).

Higher corn and soybean prices are passed through to the consumer largely through higher fat and oil prices and indirectly through higher feed costs.

In general, higher feed grain prices have helped net cash income for row crop producers, but have also raised feed costs that lowered profit margins for livestock, dairy and poultry producers. Feed costs make up 51% of expenses for dairy, 19% for beef cattle, 42% for hogs, and 35% for poultry farm business. Price-feed ratios for most species show a decline throughout most of the period since 2005/06 (see figure 6). 8 Productivity gains, such as increased pigs per litter and increased milk production per cow, have helped offset higher feed costs, along with increased availability of DDGs as mentioned previously. Moreover, feeding of DDGs has replaced as much as 80 percent of the calories lost through the reduction of com fed to livestock, while adding to the overall protein content of feeds (Ferris 2013).

Ethanol production is primarily concentrated in the com producing states of the Midwest and much of it is transported to the coasts which represent the bulk of motor fuel demand.

Current penetration rates would imply a blend wall of less than 13.4 billion gallons for ethanol. Ethanol produced in excess of that amount must be held as stocks or exported. Lastly, while export markets have in the past welcomed U.S. ethanol production, current export prospects are reduced because of increased competition from Brazil and anti-dumping duties imposed on U.S. exports to the European Union. Indeed, EIA projects net imports of ethanol increasing over the next 5 years, rising to 1 billion gallons in 2018. Projecting trade of ethanol between the U.S. and Brazil remains highly uncertain and will depend on biofuel policies in both countries as well as fuel prices.

Examples of next generation fuels from materials that are not associated with food production include biomass, algae, and crop residues. Demonstration plants have been constructed to assess various conversion technologies that can produce next generation biofuels, such as cellulosic ethanol, butanol, biojet fuel, and Fischer-Tropsch diesel. The production costs associated with the development of these fuels remains high.

In order to get beyond the blend wall, there has been considerable investment in drop-in fuels, which are substantially similar to gasoline, diesel and jet fuels and therefore have less blending constraints than ethanol and can help, along with additional biodiesel use, overcome the blend wall. These fuels can be made from a variety of biomass feedstocks and are designed to “drop-in” to existing infrastructure. The Department has entered a partnership with the Department of Energy and U.S. Navy to invest up to $510 million during the next three years to produce advanced, drop-in aviation and marine biofuels to power military and commercial transportation.

Mr. GLAUBER. Well, I think, you know, it is clear that, as I said in my opening statement, that increased ethanol production has precipitated a large increase in corn production and a large increase in corn demand. With that, you see increased prices. Now, a lot of other factors are out there in the world that affect prices. There is a whole list of things that people typically talk about. But things like we had some fairly serious droughts over the period. We have had, you know, increase in foreign demand, a number of things have affected price. But most of the studies that we have looked at show that ethanol has contributed to some share of that increase. And I think my own study showed about 30 percent. That is similar to a lot of other studies that have been out there.

Mr. TERRY. Help me grasp this, so because cellulosic hasn’t really gotten out of the pilot to mass production yet, you were able to just waive that portion that was designated for this cellulosic growth? Mr. GRUNDLER. That is correct. We adjusted the volume down something like 98, 99 percent, based on our estimate about what that volume would be in the forthcoming year.

Mr. DOYLE. Dr. Grundler, I see the President’s Council of Economic Advisers is warning us that increasing production of food-based fuel, such as ethanol, not only increases the demand for agricultural feedstocks but may also make demand less elastic, through such measures as biofuel blending requirements, and as such, the integration of food and energy markets can cause shocks in one market that get transmitted to the other. We have seen the expansion of corn ethanol increase corn prices by 36% from 2000 to 2009. CBO estimated that the use of ethanol for fuel accounted for about a 28 to 47% increase in the price of corn and a 10 to 15% increase in food prices. And it is important to note that these increases occurred during a time when the U.S. harvested a record 13.1 billion bushels of corn. Grocery bills have been rising 3 to 4% every year, and they will rise by the same margin in 2013. In 2011, retail food costs rose 3.7 percent according to the USDA. After increasing corn ethanol mandate in 2007, the consumer price index for meat, poultry, fish, and eggs accelerated by 79 percent. The doubling of the ethanol mandate in 2007 caused a 30 percent increase in the price of corn from 2006 to 2010, according to economists. And the USDA is warning us that corn shortages, caused in part by the ethanol mandate, will drive up U.S. food prices by another 3 to 4 percent in 2013.

As we are moving from E10 to E15, what can you do to make sure that that space is not entirely filed by corn ethanol that can negatively affect feed prices and for farmers and food prices for consumers?

Mr. GRUNDLER. Well, sadly in addition to all the innovations that the RFS policy has inspired in terms of new technology, it has also inspired a lot of innovation in the criminal mind. And we have discovered what can only be called as counterfeiters, and we discovered this through our enforcement arm at the agency, through hotlines and tip lines. And as I hope you can appreciate, it takes a while to build a criminal case and to gather the evidence to make the prosecution. But the good news is that the United States achieved several convictions already with extended jail time, prison time for these counterfeiters as well as very high fines and confiscated private jets and luxury automobiles in the process.

The bad result that you are no doubt alluding to is this did create a chill in the marketplace.

Mr. Pompeo: Mr. Grundler, you have got a difficult challenge. You have got to implement not only this RFS but the CAFE and GHG standards for cars and trucks. The RFS last revised in 2007, we have got new CAFE and GHG rules. Have the CAFE and GHG rules affected compliance with the RFS in a material way?

Mr. GRUNDLER. What they have done is reduced the demand for gasoline in the country and that makes the blending challenge that much harder. So with respect to that, I don’t think it has affected it yet, but it has certainly accelerated this blend wall phenomena faster than anyone expected in 2007.

Mr. POMPEO. So we have got two sets of rules and we are now trying to mix too many renewable fuels into too little gasoline, that is the mathematical challenge you face is that correct?

Mr. GRUNDLER. Essentially. There is no doubt that consumers have not demanded high amounts of E85, and it is likely because of the way the product is priced. It is not today priced consistent with its energy content and I think consumers, some consumers have figured that out. And I would just say you are right, no one is going to put in infrastructure unless they have—are going to make those investments themselves unless they can see recouping those investments.

Mr. OLSON. This clearly is a very passionate issue that crosses party lines. But we owe the American people a thorough review of the RFS for one simple reason: The American energy outlook that drove the creation of ethanol tax subsidies in RFS is in the dustbin of history. Tax preferences for corn-based ethanol were created last century and mutated into RFS this century. Why the spur of government activity? Because we thought we hit peak gas. Meaning that to feed our ever-growing demand for gasoline we had to buy more and more oil from foreign sources that weren’t reliable. Our production was going down every single day. But the American innovator, with new technology, has pushed peak oil back to the next century. And while I think the best solution to this problem is to repeal RFS, my mind is not closed.

Yes or no: Does the EIA expect a spike in the use of either E15 or E85? Spike E15, E85, next couple years. Mr. SIEMINSKI. In production volumes?

Mr. OLSON. Production volume, use in automobiles, transportation.

Mr. SIEMINSKI. No, we are seeing a lot of difficulty in producing those fuels.

Mr. OLSON. So I think that is a no; no spike there. Yes or no: Does EIA expect sudden widespread production of advanced biofuels in the next few years?

Mr. SIEMINSKI. Not without a technological breakthrough.

Mr. OLSON. There we go. So in your opinion, these facts bode well for compliance with the RFS as it stands today?

Mr. SIEMINSKI. As my testimony said, the RFS as it is currently constituted simply can’t be met.

Mr. ENGEL. I first want to say that there has been a lot said, both good and bad, obviously, regarding the Renewable Fuel Standard. And the most important information I think to remember is that the RFS reduces our dependence on foreign oil and reduces our carbon emissions. And we will have to see whether or not it will be a success or a failure. But I think there are things we can do now to help strengthen the RFS, decrease our reliance on foreign oil, and improve our national security. For many years, and I just recently introduced the bill for this Congress, I call it the Open Fuel Standard Act, which I believe is a complement to the RFS. I introduced it in a bipartisan way,

And what the legislation essentially does is requires auto manufacturers to build cars that can run on alternative fuels in addition to gasoline. Mr. Shimkus and I have in previous Congresses teamed together to push this. This could include ethanol, methanol, natural gas, electricity, biodiesel, hydrogen, or a new technology. It would empower consumers to make a choice about which fuel was best for them. And I hope that we would take up this legislation.

Mr. GRUNDLER. Currently there are somewhere between 10 and 12 million flex-fuel vehicles on the road right now. But it appears, based on the evidence, that consumers are not using them to buy E85. I think roughly 100 million gallons of E85 was sold last year. Perhaps Mr. Sieminski has got a better number. And it is likely that is due to a number of factors. Some owners don’t know they have got a flex-fuel vehicle. Some owners have these flex-fuel vehicles but they may live in Texas where there might be one station selling E85. And some are discouraged by the price of E85. So if there were more flex-fuel vehicles available I doubt that would change this pricing dynamic.  Ford and General Motors are roughly making 40% of their vehicles as flex-fuel; and Chrysler is making a significant percentage as well. So they are on track to meet their commitment of 50% of production. And yet the evidence to date shows that consumers have not been choosing to use the higher blend ethanols.

As you probably know, Congress, in developing the RFS, came up with basically two different categories of fuels and chose to grandfather any facility that hadn’t commenced construction at the time of passage. So corn-based ethanol, most of that volume is, in fact, grandfathered, and so it is not required by law to meet the 20% greenhouse gas reduction threshold. We know over time that there are a number of economic incentives to improve the efficiency of your operation to look for cheaper crops, seek higher yield feedstocks. So we expect that that efficiency will improve. And, in fact, in our analysis of new plants and future plants out in 2022, when we did the impact analysis, did determine that those new plants would achieve the 20 percent reduction.

Mr. MATHESON. But the current plants, because they are grandfathered, are not.

Mr. GRUNDLER. Well, it depends. It was going to be a plant-specific thing. For example, those plants that may have switched from coal to natural gas would be more efficient.

 

Mr. WELCH. I have sat through this hearing because I have come to the conclusion that corn ethanol is a bad environmental policy, bad energy policy, bad food policy. And that is largely because of two things that I have been hearing over and over again from everyday Vermonters, first farmers, who have just been hammered with the increase in the feed cost that is associated in part with the corn-based ethanol. And then, secondly, a lot of the small engine repair people are absolutely convinced that the ethanol is detrimental to these engines. And if I didn’t believe it, my own chain saw got wrecked, and I am pretty upset about it, let me tell you.

Last year when we had the worst drought in 50 years, more than 70 percent of the cattle country was impacted. Ten Governors, 156 Members of Congress, including me, in a broad coalition of farm and food groups requested an EPA waiver. And that was denied. But in denying the waiver, the EPA appears to have created a stricter standard than Congress had, at least that is how I read it, rejecting harm to States or regions and instead determining that the agency needed to show that RFS implementation would severely harm the entire U.S. Economy. So I need some clarification on that, because the spike in feed prices certainly hurt us. It hurt every agricultural activity associated with livestock. So I am wondering what it would take from the perspective of where you sit for a waiver to have a valid factual basis for you to act.

References

Coyle, W.T. 2010. Next-Generation Biofuels: Near-Term Challenges and Implications for Agriculture, U.S. Department of Agriculture, Economic Research Service, May 2010. www.ers.usda.gov/publicationslbio-bioenergy/bio-O 1-0 I.aspx#. UcCzuNiSJIO Energy Policy Research Foundation, inc.

(EPRINC). 2012. Ethanol’s Lost Promise: An Assessment of the Economic Consequences of the Renewable Fuels Mandate. Washington, DC. Ferris, J. 2013. “Impacts of the Federal Energy Acts and Other Influences on Prices of Agricultural Commodities and Food.” Michigan State University, Department of Agricultural, Food and Resource Economics. Staff Paper 2013-02.

Ferris, J. 2013. “Impacts of the Federal Energy Acts and Other Influences on Prices of Agricultural Commodities and Food.” Michigan State University, Department of Agricultural, Food and Resource Economics. Staff Paper 2013-02.

 

 

Posted in Renewable fuel standard RFS, Transportation | Leave a comment

Mining: Waste, Pollution, Destruction from Ugo Bardi’s “Extracted”

[ I’ve reworded/shortened some of the wording at times from this excellent book.

Alice Friedemann   www.energyskeptic.com  author of “When Trucks Stop Running: Energy and the Future of Transportation”, 2015, Springer and “Crunch! Whole Grain Artisan Chips and Crackers”. Podcasts:  KunstlerCast 253, KunstlerCast278, Peak Prosperity]

Bardi, Ugo. 2014. Extracted: How the Quest for Mineral Wealth Is Plundering the Planet. Chelsea Green Publishing.

Mountain top removal consists of blasting away entire mountains to get the underlying coal seams or other mineral deposits. Forests, streams, and wildlife are destroyed as well, with the tailings smothering landscapes and waterways.

Coal is just one of the minerals that generates vast amounts of solid waste that must be disposed.

Copper is as well.  We produce 15 million tons of copper a year from ores that are only 0.5% copper, which means 3 billion tons of waste ore – even more than the total mass of concrete produced a year globally.

Now think of all the waste generated by all mining – surely tens of billions of tons of rock.  And as the best ores are used up, the less concentrated ores remain, which produce even more solid waste.

Worse yet, this waste isn’t just piles of rock – chemicals and other reactive substances such as cyanide, and arsenic.

  • Gold mining uses mercury
  • Extraction of uranium uses hydrogen peroxide and sulfuric acid.
  • Fracked oil and gas are laced with acids, solvents, and other chemicals that can contaminate water sources
  • underground coal fires can smolder for decades sending massive amounts of toxic gases into the air

In the end the products made are “consumed” and destroyed or discarded. Every stage in-between also generates waste: manufacturing leads to industrial waste, consumption of products to urban waste.

Mining products don’t have to be poisonous or reactive to do harm – sheer volume is enough. For example concrete decays and a huge fraction of the world’s land surface – 0.5 to 3% – is covered with roads, parking lots, buildings, commercial centers, and so on. That’s 700,000 to 3,000,000 square kilometers (270270 to 1.16 million square miles).

Furthermore, much of this is built on top of prime farmland, the best soil for growing food. In Holland, 13.2% of their nation is covered in permanent structures, and Belgium 9.8%, mainly on flat areas that could have grown food.

Topping all other waste as a threat to humanity is radioactive waste.  Plutonium is one of the most poisonous substances in existence. It takes so long to decay that even 100,000 years from now, 6% of it will still exist. From an ethical point of view, we are doing future generations a tremendous disservice. We are passing onto them heavy loads of dangerous materials, and it is not at all obvious that they’ll have the scientific and technological tools to deal with the problem, or even that they will be able to recognize that it exists.

Heavy metals are also often toxic, and exist in such huge quantities now that they harm entire ecosystems. Although they may be in landfills, there’s no guarantee that centuries or even sooner they won’t contaminate aquifers and cause other harm, such as the Love Canal landfill in New York which homes were built on top of leading to cancer, nervous disorders, birth defects, and other health problems.

Heavy metals are also being dispersed world-wide as fine particulates and volatile compounds that can be inhaled or eaten, sometimes as a result of incineration, since no filter is 100% efficient. Nano-sized particles are suspected of being the most damaging kind for our health, and enter the air via smokestacks. Incineration gives us the illusion we’ve gotten rid of waste, but may in fact be transforming it into more dangers and difficult compounds that the original ones.

Most of it is probably from industrial combustion though, especially coal burning. Coal has both heavy and radioactive metals that are emitted into the atmosphere as small particles after they’re burned. Heavy metals are also transformed into powders as a result of abrasion, corrosion, and other industrial, unavoidable processes affecting most metallic objects.

And when metals are dispersed this way, their concentrations are so low that they can’t be recovered.

Mercury is one of the most toxic metals known, and so far we’ve produced about 500,000 tons of it.  In addition, coal plants generate 1,500 tons a year roughly, of which probably a few hundred thousand tons have been dispersed into the atmosphere.  Where did the 500,000 tons go?  Perhaps 50,000 tons are still in the industrial system (thermometers, fluorescent lamps, batteries, dental fillings, etc.). Much is landfilled, incinerated, or dumped somewhere.  About 200,000 tons are present in the first 15 centimeters of soil (6 inches). Even more is in the oceans as dispersed powder or soluble compounds.

Mercury has a half-life of 3,000 years, so even if we stopped mercury production it would remain for thousands of years.  Meanwhile we are accumulating it by breathing, drinking, and eating. Since we’re at the top of the food chain, we’re probably the species most at risk from mercury accumulation.

Mercury is a neurotoxin, damaging the nervous system, as well as the liver and more. It continues to be released, but we don’t know how this will affect us.  Some recent studies who that the great Permian extinction 250 million years ago was associated with high levels of mercury resulting from volcanic eruptions.

The 4 most toxic substances are mercury, arsenic, lead, and cadmium, which are also being released by mining and industry. Chromium-3 is common in the earth’s crust and needed for human metabolism, but when transformed by industry to make chromium plating into chromium-6, it’s highly carcinogenic.

The problems generated by single substances are compounded and amplified by their combinations. We are not exposed to chemicals one at a time and for limited spans of time but in combinations of tens or even hundreds of them, continuously, in our daily lives.  The number of chemical substances registered for industrial uses is 100,00 in the EU and 84,000 in the U.S. We inhale, eat, and artificial chemicals with no idea what they will do to us long-term.

 

Posted in Chemicals, Coal Ash, Mercury, Nuclear, Pollution, Ugo Bardi | Tagged , , , , | 2 Comments

We’re killing our food supply and technology can’t save us

Farrell, Paul B. Feb 11, 2015. Opinion: We’re killing our food supply and technology can’t save us. Big Ag can’t feed 10 billion and magical technologies won’t appear.  MarketWatch.

We’re maxing-out on Peak Food. Billions go hungry. We’re poisoning our future, That’s why Cargill, America’s largest private food company, is warning us about water, seeds, fertilizers, diseases, pesticides, droughts. You name it. Everything impacts the food supply. Wake up America, it’s worse than you think.

The truth is Big Ag worldwide farm production can’t feed the 10 billion humans forecast on Planet Earth by 2050.

Conservative Greg Page, executive chairman of the Cargill food empire, has that great can-do spirit of capitalism: At $43 billion, Cargill is America’s largest privately held company. Listen to the future he sees coming: “Over the next 50 years, if nothing is done … crop yields in many states will most likely fall … the costs of cooling chicken farms will rise … and floods will more frequently swamp the railroads that transport food in the United States” … he wants American agribusiness to be ready.

But what if Cargill’s scientists are too optimistic, when arguing America’s agriculture sector is “well prepared to adapt to changes.” Former New York mayor, billionaire Michael Bloomberg, was skeptical of Cargill. The Times reported Bloomberg asking Page: “Do the technologies exist? Or are you saying they will someday, ‘as in, we know there will be a cure for cancer, but we have no idea when or how’?”

Yes, food is one of the biggest problems in the world: We already have trouble feeding the 7.3 billion people already here today. And it’s virtually impossible to feed another 3 billion by 2050, warns Jeremy Grantham, whose firm is an investment manager for $120 billion, and also funds the Grantham Research Center at the London School of Economics.

Bill Gates caps population at 8 billion people. Columbia University’s Jeff Sachs, head of the Earth Institute and a key adviser to the UN Secretary General, warns that five billion is the max Earth can sustain. Yet, at today’s trajectory, it’s 10 billion, a disaster waiting to happen.

The Bush Pentagon already warned us that by 2020 the planet’s “carrying capacity” will be so drastically compromised America’s war machine is already preparing military defense systems for the coming “all-out wars over food, water, and energy supplies.”

Grantham is not as optimistic as Page. Just the opposite, he reinforces the Pentagon’s worst fears, warning of an “inevitable mismatch between finite resources and exponential population growth” with a “bubble-like explosion of prices for raw materials,” plus commodity shortages that are a major “threat to the long-term viability of our species when we reach a population level of 10 billion,” making “it impossible to feed the 10 billion people.”

The planet’s “carrying capacity” cannot feed 10 billion people, so Grantham concludes: “As the population continues to grow, we will be stressed by recurrent shortages of hydrocarbons, metals, water, and, especially fertilizer. Our global agriculture, though, will clearly bear the greatest stresses.”

Agribusiness has the “responsibility for feeding an extra two to three billion mouths, an increase of 30% to 40% in just 40 years. The availability of the highest quality land will almost certainly continue to shrink slowly, and the quality of typical arable soil will continue to slowly decline globally due to erosion despite increased efforts to prevent it. This puts a huge burden on increasing productivity.” An impossible equation for Cargill.

Grantham believes “humans have the brains and the means to reach real planetary sustainability,” But “the problem is with us and our focus on short-term growth.” Our “human ingenuity” can even solve the energy problem, even shortages of metals and fresh water. Even solve the population demand problem without starvation, diseases and wars.

But agriculture is facing a huge loss of nonrenewable resources that technology cannot solve, so here’s why agriculture is the world’s No. 1 time bomb. And why American politicians damn well better start to deal with Grantham’s five constraints:

  1. We’re “running out completely of potassium (potash) and phosphorus (phosphates) fertilizers and eroding our soils … Their total or nearly total depletion would make it impossible to feed the 10 billion people …
  2. Potassium and phosphorus (in fertilizer) are necessary for all life; they cannot be manufactured and cannot be substituted for …
  3. “Globally, soil is eroding at a rate that is several times that of the natural replacement rate …
  4. “Poor countries found mostly in Africa and Asia will almost certainly suffer from increasing malnutrition and starvation. The possibility of foreign assistance on the scale required seems remote.
  5. “Many stresses on agriculture will be exacerbated … by increasing temperatures … increased weather instability … frequent and severe droughts and floods.”

Grantham is skeptical of solutions based on the usual short-term thinking will work in the future: “Capitalism, despite its magnificent virtues in the short term, above all, its ability to adjust to changing conditions, has several weaknesses. Capitalism cannot deal with the tragedy of the commons, e.g., over fishing, collective soil erosion, and air contamination.”

Just the opposite, unregulated free markets just makes things worse.

And yet in today’s culture of science denialism, the “finiteness of natural resources is simply ignored, and pricing is based entirely on short-term supply and demand.” In short, the next few decades challenge a fundamental tenet of capitalism: That the public good is best served by the “invisible hand” of competing individuals, acting solely in their own separate special interests. No cooperation, no global solutions, it’s everyone for themselves, no restrictions. Unfortunately that’s a dead-end for everyone, a time bomb soon to explode.

Posted in Fertilizer, Peak Food | Tagged , , , | 5 Comments

Conventional economic theory ignores the laws of physics

[ It’s the energy stupid!  These figures clearly show a link between energy and the economy. Conventional economic theory has to ignore energy or that would prove that there are Limits to Growth.  What follows is from Nafeez Ahmed’s 2017 book “Failing States, Collapsing Systems BioPhysical Triggers of Political Violence:, Springer.

Alice Friedemann   www.energyskeptic.com  author of “When Trucks Stop Running: Energy and the Future of Transportation”, 2015, Springer and “Crunch! Whole Grain Artisan Chips and Crackers”. Podcasts: Practical Prepping, KunstlerCast 253, KunstlerCast278, Peak Prosperity , XX2 report ]

Fig. 4.1 Increasing Global Energy Consumption. Source : Gail Tverberg

 

Fig. 4.2 Exponentially increasing GDP. Source : J. Bradford Delong (1998)

Fig. 4.3 Correlation between Global Energy Consumption and GDP. Source : Gail Tverberg

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Ahmed, Nafeez. 2017. Failing States, Collapsing Systems BioPhysical Triggers of Political Violence. Springer.

An issue largely overlooked within conventional economic theory is that all economic systems are fundamentally physical systems in which energy is transmitted and converted into different forms, in compliance with the second law of thermodynamics—and in which depletion must take place with respect to non-renewable energy resources due to the conservation of matter and energy.

Economic theory does not recognize that the laws of physics provide any meaningful constraint on the capacity of economies to grow continuously by forever increasing their material throughput. While there is scope to recognize that economic systems manifest “emergent properties” with their own distinctive rules, patterns and structures, that does not mean that these rules can be trivially deduced from—or break—the laws of physics. Rather, as with any complex system, the macro-structures emerge from but still operate within those laws. This means that however “emergent” the macro-structures of economics appear to be, they can never be free of the second law of thermodynamics (Pueyo 2014 ).

Thus, the direct correlation between economic growth and the growth of energy consumption is because economic growth is fundamentally dependent on and enabled by energy.

Human population, the global economy, and energy production have all “grown exponentially”,  yet energy still “imposes fundamental constraints on economic growth and development.

Why we appear to still be growing and why this will eventually lead to violence

Despite the empirical evidence for such conclusions, “these perspectives have not been incorporated into mainstream economic theory, practice, or pedagogy…” (J. H. Brown et al. 2011).

As a result, conventional economists failed to anticipate the 2008 global financial crisis, and since then have consistently failed to anticipate the major economic crises in ensuing years, while consistently and incorrectly forecasting returns to economic growth. In reality economic growth on a global scale is experiencing an unmistakable plateau, that correlates clearly with the emerging plateau in energy production (Fig. 4.4).

Fig. 4.4 Correlation between oil, energy and GDP. Source : Gail Tverberg

 

Fig. 4.5 Declining rate of economic growth. Source : Jean-Marc Jancovici

According to Jancovici, since the 1960s—which is when the EROI of the global fossil fuel system as a whole was at its highest according to most studies: “…the growth rate of the GDP per capita (world average) has been slowly—and constantly— decreasing…” (Jancovici 2013 ). In the decade after 1960, he calculates, GDP was increasing at +3.5 % per year. For the decade after 1970, this rate of increase dropped to +2 % per year. Over the last three decades, the rate of GDP growth dropped to +1.5 % per year. And in the period following the 2007–8 fi nancial crash up to 2012, it has dropped even further to 0.4 % per year on average (Fig. 4.5).

The steady decline in the rate of GDP growth thus correlates directly with the steady decline in EROI of production from the global fossil fuel resource base, even as energy production has continued to increase. However, as energy production has slowed down over the last decade since 2005—accompanying the shift to lower quality unconventional liquids—now approaching an undulating plateau, so too has GDP growth.

Consider this revealing diagram produced by Bloomberg, which illustrates how World Bank data confirms not only that economic growth is plateauing, but that it is likely to continue plateauing for the foreseeable future (Fig. 4.6)

Fig. 4.6 Plateauing of economic growth. Source : Bloomberg

Economic growth, to the extent that it has been able to continue, is being driven largely by an increasing availability of cheap credit—rather than any fundamental and permanent transformations in energy intensity. The ratio of global debt, excluding financial institutions, has grown from 175% of global GDP on the eve of the 2007/2008 financial crisis to 210% today. Cheap credit has enabled excessive borrowing, risk taking and sharply rising asset prices, driving the same form of unsustainable debt- driven growth that partly led to the 2008 financial crash (Stewart 2015).

Growth, especially since the 1970s, has been premised increasingly on the financialization of the economy through the creation of new instruments of credit creation to permit extensive leveraging.

Such debt-driven growth, however, only offsets the apparent biophysical limits to growth by accelerating debt and socializing the costs in the event of a financial crisis onto general consumers, while protecting the financial institutions most responsible for debt-generation. In the energy sector, as oil prices have slumped, growth has increasingly been driven by debt. Oil majors ExxonMobil, Royal Dutch Shell, BP, and Chevron hold a combined net debt of $184 billion, more than double their 2014 debt levels (Williams and Olson 2016).

Global industrial civilization is thus facing a convergence of crises: the plateauing of energy production and the plateauing of economic growth, amidst an inexorable decline in EROI.

While the abundance of cheap fossil fuels played the key role in permitting the expansion of the monetary and financial system—enabling exponential economic growth—from the 1950s onwards, the accelerating reduction in EROI has accompanied an increasing reliance on financialization: the shift from the expansion of money, to the expansion of credit (debt-money). Beginning concertedly in the 1970s, this has been most exemplified in the US Federal Reserve’s post-2008 rubber-stamping of quantitative easing to use money printing or credit creation (debt-money expansionism) as a mechanism to offset economic crises and bailout insolvent banks endangered by mass consumer defaults. The policy’s fiscal twin is austerity—clamping down on state expenditures in the form of public spending on infrastructure, education, health care and other forms of critical social investments and public services, while using state power to protect ongoing debt-based profiteering in the corporate-financial sectors (Smith-Nonini 2016).

The neoliberal era, with its policies of extreme deregulation, debt-money expansionism and harsh national austerity, is thus a direct product of the changing dynamics of the global energy system and the transition into a world of more expensive, lower quality, and environmentally more destructive fossil fuels. As the ‘triple crunch’ tightens from now to mid-century, this forces the global economy as a whole into adopting a limited range of policies to address the dampening of growth underpinned by geophysical realities.

Within a framework that continues to be wedded to the idea that business-as-usual must continue —one tied into protecting the vested interests whose tremendous power remains embedded within the unequal structures of the prevailing geopolitical, economic and energy order— the only options are to rely excessively on debt-money expansionism to shore-up dying industries in the fossil fuel and financial sectors, while intensifying austerity so as to socialize the costs of this onto the wider public, while privatizing the ‘benefits’ in terms of profits

Those profits, however, will accrue to an ever tightening circle of financial and corporate institutions as more and more of the energy- financial incumbency are squeezed out under the weight of their own unsustainability. The escalation of national austerity policies cannot be sustained for long without increasingly debilitating impacts on the health and well-being of wider publics. This means that phenomena such as the 2008 Occupy movement and the 2011 Arab Spring were not just historical blips that may or may not occur again, but represented major breaking points in the system due to populations feeling unable to adjust to intolerable conditions imposed by escalating global systemic crises. Such breaking points, then, represent a taste of things to come.

The 2008 global financial crisis was partly triggered by the oil price hikes that year, which were driven by the plateau in conventional oil production since 2005. High prices fed into inflation and undermined the capacity of consumers to service their mortgage debts, thus playing a key role in the ensuing spate of defaults (Ahmed 2010).

Economic growth, to the extent that it has been able to continue, is being driven largely by an increasing availability of cheap credit—rather than any fundamental and permanent transformations in energy intensity. The ratio of global debt, excluding financial institutions, has grown from 175 % of global GDP on the eve of the 2007/2008 financial crisis to 210% today. Cheap credit has enabled excessive borrowing, risk taking and sharply rising asset prices, driving the same form of unsustainable debt driven growth that partly led to the 2008 financial crash (Stewart 2015 ).

 

Posted in Economists are Stupid and Crazy, Limits To Growth | Tagged , , , , , | 3 Comments

Ugo Bardi predictions of the future from “Extracted”

[ This is just a small sampling of what Bardi thinks might happen post fossil fuels, mostly shortened and reworded.

Alice Friedemann   www.energyskeptic.com  author of “When Trucks Stop Running: Energy and the Future of Transportation”, 2015, Springer and “Crunch! Whole Grain Artisan Chips and Crackers”. Podcasts:  KunstlerCast 253, KunstlerCast278, Peak Prosperity]

Bardi, Ugo. 2014. Extracted: How the Quest for Mineral Wealth Is Plundering the Planet. Chelsea Green Publishing.

When we can’t afford to commute we’ll live near where we work and walk.

Although the degrowth movement thinks a simpler society would make us happier and our lives less stressful, it’s likely we may spiral downward too quickly and revert to a purely agricultural society, not what most would call a positive result.

Only a tiny fraction of society accepts the degrowth philosophy, and unfortunately due to Jevons paradox, any resources saved are used up by someone somewhere else.

If we have forced degrowth, it’s likely to play out as in the Soviet Union in 1991 as described by Dmitry Orlov. After the collapse, soviet citizens life expectancy went down, abd increased rates of drug abuse, depression, and illness.   Security collapsed due to massive crime, the gap between rich and poor widened, social services declined, and Orlov sees signs of collapse in America already (also see his book Reinventing Collapse).

We might avoid the worst in terms of climate disruption [as fossils decline], but what about high-grade ores and the dispersal of the elements they contained all over the planet in forms that cannot be recovered without tremendous amounts of energy?

Most likely we return to an agrarian society. The big flare of fossil fuels will end up being just a short-lived episode—a peculiar moment of energy availability that generated a lot of commotion and movement but abated rapidly.  M. King Hubbert had already predicted this in 1976 in a paper titled “Exponential growth as a transient phenomenon in human history”.

Future agricultural civilizations will have to cope with badly depleted soil that was ruthlessly mined during the industrial age, which will take centuries, so global population will probably be much smaller than today.  At least our descendants won’t need as much stuff as now, and will be able to “mine” plenty of metals from aluminum beverage cans, copper from pipes, iron and steel from buildings and so on.

the only way to make new metals by smelting them, or making machinery, and the structures we have today will be limited by scarce wood resources and the charcoal to provide the heat and power. There’d be little choice but to go back to muscle power of humans and animals, unlikely to ever again restart an industrial revolution.

The planet has been “plundered to the utmost limit, and what we will be left with are only the ashes of a gigantic fire. We are leaving to our descendants a heavy legacy in terms of radioactive waste, heavy metals dispersed all over the planet, and greenhouse gases—mainly CO2—accumulated in the atmosphere and absorbed in the oceans.”

It appears that we found a way to travel to another planet without the need for building spaceships.  It is not obvious that we’ll like the place, but there is no way back; we’ll have to adapt to the new conditions. It will not be easy, and we can speculate that it will lead to the collapse of the structure we call civilization, or even the extinction of the human species”.

Posted in Ugo Bardi | Tagged | 4 Comments

Fossil and Nuclear Energy Reading List

[ Books and articles related to fossil fuels and nuclear energy.  More comments after the list.  Alice Friedemann   www.energyskeptic.com  author of “When Trucks Stop Running: Energy and the Future of Transportation”, 2015, Springer and “Crunch! Whole Grain Artisan Chips and Crackers”. Podcasts: Derrick Jensen, Practical Prepping, KunstlerCast 253, KunstlerCast278, Peak Prosperity , XX2 report ]

Overviews

  1. Charles Hall, Energy & the Wealth of Nations: Understanding the Biophysical economy,  2011
  2. M. Klare. The Race for What’s Left: The Global Scramble for the World’s Last Resources. 2013.
  3. Charles. Hall. Hydrocarbons & the Evolution of Human Culture. 2003. Nature 426.
  4. J. Perlin, A Forest Journey: The Role of Wood in the Development of Civilization, 2005.
  5. C. Ponting, A New Green History of the World: The Environment & the Collapse of Great Civilizations, 2007
  6. R. Heinberg. The End of Growth. Adapting to our New Economic Reality. 2011.
  7. W. Youngquist, Geodestinies: The Inevitable Control of Earth Resources over Nations & Individuals, 1997
  8. D. Yergin, The Prize: The Epic Quest for Oil, Money, and Power, 1993.
  9. G. Hardin, Living Within Limits: Ecology, Economics, and Population Taboos, 1995
  10. D. Pimentel, Food, Energy, and Society, 1996

Energy Returned on Energy Invested

  1. P. Prieto & Charles A. S. Hall. 2013. Spain’s Photovoltaic Revolution. The Energy Return on Investment. Springer.
  2. D. Murphy. The Net Hubbert Curve: What Does it Mean? 2009.
  3. J. Lambert. EROI of Global Energy Resources Preliminary Status and Trends.  State  University of New York, College of Environmental Science and Forestry. 2012.
  4. C. Hall. What is the Minimum EROI that a Sustainable Society Must Have? 2009.
  5. D. Murphy, Energy return on investment, peak oil, and the end of economic growth, 2011.

Peak Oil

  1. Kerr, R. Peak oil began 2005 Science Magazine: Peak Oil Production May Already Be Here. Outside of OPEC’s vast resources, oil production has leveled off, and it’s looking like it may never rise againScience. 25 March 2011. Vol 331: 1510-11
  2. Murray, J. Peak Oil began 2005 Nature Magazine: Oil’s tipping point has passed.   26 January 2012. Nature vol 481: 433-35.
  3. Fantazzini, Dean; et al. 2011. Global oil risks in the early 21st century. Energy Policy, Vol. 39, Issue 12: 7865-7873
  4. A. Friedemann. Why do political and economic leaders deny Peak Oil and Climate Change? 2012.
  5. German peak oil report: Armed Forces, Capabilities and Technologies in the 21st Century Environmental Dimensions of Security. PEAK OIL Security policy implications of scarce resources. Bundeswehr Transformation Centre, Future Analysis Branch. 2010.
  6. K. Cobb. The only true metric of energy abundance: The rate of flow. 2013.
  7. R. Hirsch.  Peaking of World Oil Production.  Department of Energy. 2005.
  8. T. Patzek. Oil in the Arctic. 2012. 
  9. R. Patterson. March 5, 2015. Peak Russia + Peak USA means Peak World
  10. M. Simmons. Twilight in the Desert: the coming Saudi oil shock & the world economy. 2005
  11. K. Deffeyes. Beyond Oil: The View from Hubbert’s Peak. 2005
  12. K. Deffeyes. Hubbert’s Peak: The Impending World Oil Shortage. 2005

Peak Coal

  1. Wang, J. September 4, 2013. Chinese coal supply and future production outlooks [peak likely in 2024]. Energy 60: 204-214.
  2. R. Heinberg. The End of Cheap Coal. Nature 468. 18 Nov 2010.
  3. A. Friedemann. Coal: why it can’t easily substitute for oil. 2011.
  4. T. Patzek. A global coal production forecast with multi-Hubbert cycle analysis.  Energy. 2010.
  5. R. Heinberg. Blackout. Coal, Climate and the Last Energy Crisis. 2009
  6. A. Friedemann. Peak Coal is already here or likely by 2020 — if true — IPCC 100 year projections too high? 2013.
  7. New York Academy of Sciences. Full cost accounting for the life cycle of coal.  2011 pp 73-98

Peak Natural Gas

  1. D. Hughes. Oct 27, 2014. Drilling Deeper. A reality check on U.S. government forecasts for a lasting tight oil & shale gas boom.  PostCarbon
  2. B. Powers. Cold, hungry, and in the Dark: Exploding the Natural Gas Supply Myth. 2013
  3. D. Hughes. April 28, 2015. Has Well Productivity Peaked in the Nation’s Largest Shale Gas Play? Postcarbon.org
  4. SBC. October 2014. Factbook Natural Gas. [20-40% of recoverable resources are low EROI Sour Gas] SBC Energy Institute
  5. R. Heinberg. Chapter 5 of How Fracking’s False Promise of Plenty Imperils Our Future: The Economics of Fracking: Who Benefits? October 2013.
  6. A. Friedemann. Shale Oil and Gas Will Not Save Us. 2012.
  7. A. Friedemann. Natural Gas pros and cons. 2011.

Peak Uranium

Coal-To-Liquids (CTL) can’t replace oil

Tad Patzek, et al.,  Potential for Coal-to-Liquids Conversion in the United States, 2009, Natural Resources Research 18.

Gas, tar sands, etc., can’t replace oil

  1. Höök, M., Tang, X. 2013. Depletion of fossil fuels and anthropogenic climate change: a review. Energy Policy, 52: 797-809
  2. Höök, M., et al. 2014. Hydrocarbon liquefaction: viability as a peak oil mitigation strategy. Philosophical Transactions. Series A: Mathematical, physical, and engineering science, 372
  3. Höök, M. & Aleklett, K. 2010. A review on coal-to-liquid fuels & its coal consumption. International journal of energy research Vol. 34 10:848-864
  4. Gray, D., et al. August 1, 2012.  Topic Paper #8 Production of Alternative Liquid Hydrocarbon Transportation Fuels from Natural Gas, Coal, and Coal and Biomass (XTL). National Petroleum Council
  5. NPC. 2012. Natural Gas. Topic Paper #21. An Initial Qualitative Discussion on Safety Considerations for LNG Use in Transportation. National Petroleum Council

Nuclear Power

Nuclear Waste

Biofuels

  1. A. Friedemann. Peak Soil: Why Cellulosic and other Biofuels are Not Sustainable and a Threat to America’s National Security. 2007.
  2. German National Academy of Science (Leopoldina Nationale Akademie der Wissenschaften).  Bioenergy — Chances and LimitsPage 30-56 English Version. 2012.
  3. A. Friedemann. Dozens of reasons why algae will never replace oil. 2011.
  4. A. Friedemann. Analyzing energy breakthroughs: a skeptical look at seaweed ethanol. 2011.

Tar Sands a.k.a. oil sands

  1. Nikiforuk, A. 22 May 2013. Difficult Truths about ‘Difficult Oil’. As we work down the hydrocarbon pyramid, energy gets messier and much more costly. TheTyee.ca
  2. Nuwer, R. Feb 19, 2013. Oil Sands Mining Uses Up Almost as Much Energy as It Produces. InsideClimate News.
  3. A. Friedemann. Why Oilsands (a.k.a. tarsands) can’t replace oil. 2011.

Kerogen a.k.a. Shale Oil

  1. A. Friedemann. Shale Oil Overview. 2011.
  2. R. Udall. The Illusive Bonanza: Oil Shale in Colorado. 2005.

Methane Hydrates

  1. A. Friedemann. Why we aren’t mining methane hydrates now. Or ever. 2014.
  2. C. Nelder. Are Methane Hydrates Really Going to Change Geopolitics?  The Atlantic.  2013.
  3. Office of Naval Research Science & Technology. Fiery ice from the Sea. 2002.

IPCC projections too high

 

An Energy slave unit equals the average output of a man doing 150,000 foot-pounds of work per day 250 days per year. In low-energy societies, nonhuman energy slaves are horses, oxen, windmills, riverboats. Now, the average American has more than 8,000 energy-slaves at his or her disposal and these slaves can work under extreme conditions: no sleep, 5,000° F, at 400,000 pounds per square inch pressure, etc.” Buckminster Fuller.

Oil is the master resource that unlocks all of the others. Don’t have fresh water?  No problem, just use oil to drill down 1,500 feet and pump it up.  Can’t find any fish? No problem, build a large ship and go to the ends of the earth to capture the last schools of fish with high-tech sonar and spotting planes.   It’s hard to think of a problem that can’t be solved by oil.  The only good thing about its coming diminished RATE OF FLOW is that the harm it does, like climate change, biodiversity loss, ozone depletion, acidic oceans — you name it — will decline as well.

RATE OF FLOW, RATE OF FLOW, RATE OF FLOW.  Peak oil is often mis-characterized as RUNNING OUT OF OIL.  What’s going to happen is that there will be a lot of “resources” — not economically viable, and expensive reserves with low quality oil that can only produce limited amounts, unlike conventional which flows effortlessly at first.  It’s a lot like being a billionaire but only allowed to take out $1,000 a month.

Anything which generates electricity is not a solution, because heavy-duty transportation runs on oil.

The bad news is, we can never replace fossil fuels with alternative energy resources. One of the many reasons is SCALE.  Oil is the densest form of energy on the planet next to uranium.  To replace one cubic mile of oil, which is what the world burns every year, you’d need to build 200 dams every year for 50 years (10,000 total), or 2,600 Nuclear plants per year for 50 years (130,000 total), or 5,200 coal plants a year for 50 years (260,000 total), or 1,642,000 wind turbines per year for 50 years (82,100,000 total), or 4,562,500,000 rooftop PV per year for 50 years (22,812,500,000 total).

Posted in Book List | Tagged , | 7 Comments

Book review of “Chasing the Scream: The First and Last days of the War on Drugs”

Source: Tim Kelly

[ The founder of the War on Drugs, Harry Anslinger, wanted to build as large a bureaucracy as possible. But a war on narcotics alone—cocaine and heroin, outlawed in 1914—wasn’t enough. They were used only by a tiny minority, and you couldn’t keep an entire department alive on such small crumbs. Anslinger needed more.  He scoured papers for other drug news, and lit upon marijuana as yet another drug that could be banned to gain a larger staff, budget, and prestige.  To bolster his arguments, he wrote 30 doctors about the harms of marijuana, and all but one wrote back that it would be wrong to ban it, and that it was being widely misrepresented in the press.  Anslinger ignored the weight of the evidence and went with the only doctor who thought marijuana was evil, and continued to do so throughout his career with other drugs as well.  For years, doctors kept approaching him with evidence that he was wrong about marijuana, and he began to snap, telling them they were “treading on dangerous ground” and should watch their mouths.

The Harrison act making Anslinger’s bureaucracy possible also had a giant loophole in it: doctors were allowed to prescribe heroin and other drugs to their patients if they thought it was in their patients best interests.  The Supreme Court even ruled in the doctors favor, stating that this act didn’t give the government authority to punish doctors who did prescribed drugs. But Anslinger ignored this ruling and arrested 20,000 doctors across the nation, and many of them were heavily fined as well.

While Harry Anslinger was raging against the Mafia in public, he was, in fact, secretly working for them.  The Mafia funded Harry Anslinger to launch his crusade because they wanted the drug market all to themselves. It was the scam of the century.

The main reason Anslinger gave for banning drugs was that the blacks, Mexicans, and Chinese were using these chemicals, forgetting their place, and menacing white people.

More than 50% of Americans have breached the drug laws. Where a law is that widely broken, you can’t possibly enforce it against every lawbreaker. The legal system would collapse under the weight of it. So you go after the people who are least able to resist, to argue back, to appeal—the poorest and most disliked groups. In the United States, they are black and Hispanic people, with a smattering of poor whites.   

The war on drugs was clearly a bad idea — we know that Prohibition made Al Capone and other violent gangsters possible.  Before prohibition people drank wine and beer, after they drank hard liquor, even deadly moonshine, because mafias need to avoid getting caught by intensifying drugs.  Coca leaves turn into crack cocaine, opium into heroin, marijuana into hashish.  The author Hari calls this one of the iron laws of drugs. 

The drug war has corrupted police world-wide, led to hundreds of thousands of deaths of innocent people caught in the crossfire (but they’re black or Hispanic so for many people, that’s not a problem).  Political leaders are corrupted.

And the drug war hasn’t gone away because we’ve been hammered over and over with the absolutely certain finding that drugs hijack your brain.  But it turns out that this isn’t true.  Science has prove this (but you’ll have to read the book for examples and details).  But common sense tells you that millions have taken painkillers in the hospital or temporarily for aches and pains.  Only a tiny fraction get addicted, and this book explains who they are.

There are nations that have “legalized” heroin.  It is not sold openly to everyone, but administered in government clinics, where social services and treatment programs are available.  An astounding number of heroin addicts are able to quit.  Crimes and mafias drop dramatically. AIDS and other diseases spread by needles decline as well.  This has been tried with great success in Vancouver Canada, Great Britain, Switzerland, Portugal, Amsterdam, and Uruguay (among others).  States that have legalized marijuana have seen no ill-effects — bad driving and traffic accidents have not gone up.

This is a very comprehensive overview.  There is even a chapter on Joe Arpaio and how his beyond-belief cruel women’s tent cities only drive them into addiction further when they get out — these prisons create the mental conditions that cause people to become addicts in the first place, and of course how can they change when they can’t get work after they come out? Only a few articles about the tent cities came out after Trump pardoned him, most stories focused on his draconian immigration policies.  The tent cities should have been more widely known (it wasn’t in the New York Times for instance).  They’re practically Nazi death camps.  There’s no air-conditioning in 130 F heat.  Oh, there was A/C in one of the tent prisons, but Arpaio turned it into an A/C animal shelter.

If I were a dictator I’d make everybody read this book.  And you can do something about the drug war, go to Hari’s site  www.chasingthescream.com/getinvolved  — also see www.facebook.com/chasingthescream

Alice Friedemann   www.energyskeptic.com  author of “When Trucks Stop Running: Energy and the Future of Transportation”, 2015, Springer and “Crunch! Whole Grain Artisan Chips and Crackers”. Podcasts: Derrick Jensen, Practical Prepping, KunstlerCast 253, KunstlerCast278, Peak Prosperity , XX2 report ]

Johann Hari. 2016. Chasing the Scream: The First and Last days of the War on Drugs.

The pledge to wage “relentless warfare” on drugs was first made in the 1930s.

From his first day in office, Harry Anslinger had a problem, and everybody knew it. He had just been appointed head of the Federal Bureau of Narcotics—a tiny agency, buried in the gray bowels of the Treasury Department in Washington, D.C.—and it seemed to be on the brink of being abolished. This was the old Department of Prohibition, but prohibition had been abolished and his men needed a new role, fast. As he looked over his new staff just a few years before his pursuit of Billie began, he saw a sunken army who had spent fourteen years waging war on alcohol only to see alcohol win, and win big. These men were notoriously corrupt and crooked—but now Harry was supposed to whip them into a force capable of wiping drugs from the United States forever.

And that was only the first obstacle. Many drugs, including marijuana, were still legal, and the Supreme Court had recently ruled that people addicted to harder drugs should be dealt with by doctors, not bang-’em-up men like Harry.

He pledged to eradicate all drugs, everywhere—and within thirty years, he succeeded in turning this crumbling department, with these disheartened men, into the headquarters for a global war that would last for a hundred years and counting.

Giovanni spoke. He said he was being forced to pay protection money by a man called “Big Mouth Sam,” one of the thugs belonging to a group called the Mafia that had come to the United States from Sicily and remained hidden amidst the Italian immigrants. The Mafia, Giovanni told Harry, were engaged in all sorts of crimes, and people on the railroad were being charged a “terror tax”—you gave the Mafia money or else you ended up in a hospital bed like this, or worse.

After that, Anslinger became obsessed with the Mafia, at a time when most Americans refused to believe it even existed. This is hard for us to understand today, but the official position of every official in U.S. law enforcement until the 1960s—from J. Edgar Hoover on down—was that the Mafia was a preposterous conspiracy theory, no more real than the Loch Ness Monster. They reacted the way we would now if a law enforcement agent preached Trutherism, or Birtherism, or the belief that Freemasons are secretly manipulating world events: with bafflement at the idea that anyone could believe something so silly. But Harry had glimpsed the Mafia in the flesh, and he was convinced that if he followed the trail from Big Mouth Sam to the thugs above him and the thugs above them, he would be led to a vast global web, and perhaps even to an “invisible world-wide government” secretly controlling events. He soon started keeping every scrap of information he could find on the Mafia, no matter how small or how trivial the source.

At the very end of the war, as it was becoming clear to everyone that the Germans had lost, Harry was sent on his most important mission so far: to take a secret message to the defeated German dictator. The way he later told the story, Harry was dispatched to the small Dutch town of Amerongen, where the Kaiser was holed up in a castle and planning to abdicate. Anslinger’s job was to pose as a German official and convey a message from President Woodrow Wilson: Don’t do it. The United States wanted the Kaiser to retain the imperial throne, to prevent the rise of the “revolution, strikes and chaos” it feared would follow from his sudden departure.

Anslinger managed to get the message through—but it was too late. The decision had been made. The Kaiser quit. For the rest of his life, Anslinger believed that if he had gotten the president’s plea through only a little earlier, “a decent peace might have been written, forestalling any chance for a future Hitler gaining power, or a Second World War erupting.

But what shook Harry most was the effect of the war not on the buildings but on the people. They seemed to have lost all sense of order. Starving, they had begun to riot; the cavalry had been sent to charge against them, and entire streets were on fire. Harry was standing in a hotel lobby in Berlinwhen Socialist revolutionaries suddenly fired their machine guns into the lobby, and blood from a bystander splattered onto his hands. Civilization, he was beginning to conclude, was as fragile as the personality of that farmer’s wife back in Altoona. It could break. After this, and for the rest of his life, Harry retained a deep sense that American society could collapse into wreckage just as quickly as Europe’s had.

Harry announced to his bosses that there was a way to make prohibition work: Use maximum force. Send the navy to hunt down smugglers along the coasts of America. Ban the sale of alcohol for medical purposes. Massively increase prison sentences for alcohol dealers until they were all locked up. Wage war on booze until it was only a memory.

A war on narcotics alone—cocaine and heroin, outlawed in 1914—wasn’t enough. They were used only by a tiny minority, and you couldn’t keep an entire department alive on such small crumbs. He needed more.

He found stories in the newspapers that intrigued him. They had headlines like the one in the July 6, 1927, edition of the New York Times: MEXICAN FAMILY GO INSANE. It explained: “A widow and her four children have been driven insane by eating the Marihuana plant, according to doctors who say there is no hope of saving the children’s lives and that the mother will be insane for the rest of her life.” The mother had no money to buy food, so she decided to eat some marijuana plants that had been growing in their garden. Soon after, “neighbors, hearing outbursts of crazed laughter, rushed to the house to find the entire family insane.” Harry had long dismissed cannabis as a nuisance that would only distract him from the drugs he really wanted to fight. He insisted it was not addictive, and stated “there is probably no more absurd fallacy” than the claim that it caused violent crime. But almost overnight, he began to argue the opposite position. Why? He believed the two most-feared groups in the United States—Mexican immigrants and African Americans—were taking the drug much more than white people.  This led to a  nightmarish vision of where this could lead. He had been told, he said, of “colored students at the University of Minn[sota partying with female students (white) and getting their sympathy with stories of racial persecution. Result: pregnancy.

He wrote to 30 scientific experts asking a series of questions about marijuana, and 29 wrote back saying it would be wrong to ban it, and that it was being widely misrepresented in the press. Anslinger decided to ignore them and quoted instead the one expert who believed it was a great evil that had to be eradicated. On this basis, Harry warned the public about what happens when you smoke this weed. First, you will fall into “a delirious rage.” Then you will be gripped by “dreams . . . of an erotic character.” Then you will “lose the power of connected thought.” Finally, you will reach the inevitable end point: “Insanity.” You could easily get stoned and go out and kill a person, and it would all be over before you even realized you had left your room, he said, because marijuana “turns man into a wild beast.

A doctor called Michael V. Ball got in touch with Harry to counter this view, saying he had used hemp extract as a medical student and it only made him sleepy. He suspected that the claims circulating about the drug couldn’t possibly be true. Maybe, he said, cannabis does drive people crazy in a tiny number of cases, but his hunch was that anybody reacting that way probably had an underlying mental health problem already. He implored Anslinger to fund proper lab studies so they could find out the truth. Anslinger wrote back firmly. “The marihuana evil can no longer be temporized with,” he explained, and he would fund no independent science, then or ever.

For years, doctors kept approaching him with evidence that he was wrong, and he began to snap, telling them they were “treading on dangerous ground” and should watch their mouths. Instead, he wrote to police officers across the country commanding them to find him cases where marijuana had caused people to kill—and the stories started to roll in.

The defining case for Harry, and for America, was of a young man named Victor Lacata. He was a 21-year-old Florida boy known in his neighborhood as “a sane, rather quiet young man” until—the story went—the day he smoked cannabis. He then entered a “marihuana dream” in which he believed he was being attacked by men who would cut off his arms, so he struck back, seizing an axe and hacking his mother, father, two brothers, and sister to pieces.

Many years later, the law professor John Kaplan went back to look into the medical files for Victor Lacata. The psychiatrists who examined him said he had long suffered from “acute and chronic” insanity. His family was full of people who suffered from similarly extreme mental health problems—three had been committed to insane asylums—and the local police had tried for a year before the killings to get Lacata committed to a mental hospital, but his parents insisted they wanted to look after him at home. The examining psychiatrists thought his cannabis use was so irrelevant that it wasn’t even mentioned in his files.

The most frightening effect of marijuana, Harry warned, was on blacks. It made them forget the appropriate racial barriers—and unleashed their lust for white women. Of course, everyone spoke about race differently in the 1930s, but the intensity of Harry’s views shocked people even then.

Many white Americans did not want to accept that black Americans might be rebelling because they had lives like Billie Holiday’s—locked into Pigtowns and banned from developing their talents. It was more comforting to believe that a white powder was the cause of black anger, and that getting rid of the white powder would render black Americans docile and on their knees once again. (The history of this would be traced years later in Michelle Alexander’s remarkable book The New Jim Crow.)

The arguments we hear today for the drug war are that we must protect teenagers from drugs, and prevent addiction in general. We assume, looking back, that these were the reasons this war was launched in the first place. But they were not.

The main reason given for banning drugs—the reason obsessing the men who launched this war—was that the blacks, Mexicans, and Chinese were using these chemicals, forgetting their place, and menacing white people.

It took me a while to see that the contrast between the racism directed at Billie and the compassion offered to addicted white stars like Judy Garland was not some weird misfiring of the drug war—it was part of the point.

Harry told the public that “the increase [in drug addiction] is practically 100 percent among Negro people,” which he stressed was terrifying because already “the Negro population . . . accounts for 10% of the total population, but 60% of the addicts.” He could wage the drug war—he could do what he did—only because he was responding to a fear in the American people.

In the run-up to the passing of the Harrison Act, the New York Times ran a story typical of the time. The headline was: NEGRO COCAINE “FIENDS” NEW SOUTHERN MENACE. It described a North Carolina police chief who “was informed that a hitherto inoffensive negro, with whom he was well-acquainted, was ‘running amuck’ in a cocaine frenzy [and] had attempted to stab a storekeeper . . . Knowing he must kill this man or be killed himself, the Chief drew his revolver, placed the muzzle over the negro’s heart, and fired—‘intending to kill him right quick,’ as the officer tells it, but the shot did not even stagger the man.” Cocaine was, it was widely claimed in the press at this time, turning blacks into superhuman hulks who could take bullets to the heart without flinching. It was the official reason why the police across the South increased the caliber of their guns.

But there was another racial group that also had to be kept down, Harry believed. In the mid-nineteenth century, Chinese immigrants had begun to flow into the United States, and they were now competing with white people for jobs and opportunities. Worse still, Harry believed they were competing for white women. He warned that with their “own special Oriental ruthlessness,” the Chinese had developed “a liking for the charms of Caucasian girls . . . from good families.” They lured these white girls into their “opium dens”—a tradition they had brought from their home country—got the girls hooked, and then forced them into acts of “unspeakable sexual depravity” for the rest of their lives. Anslinger described their brothels in great detail: how the white girls removed their clothes slowly, the “panties” they revealed, how slowly they kissed the Chinese, and what came next . .

Once the Chinese dealers got you hooked on opiates, they would laugh in your face and reveal the real reason they sell junk: it was their way of making sure that “the yellow race would rule the world.”

At first, ordinary citizens had taken matters into their own hands against this Yellow Peril. In Los Angeles, 21 Chinese people were shot, hanged, or burned alive by white mobs. In San Francisco, officials tried to forcibly move everyone in Chinatown into an area reserved for pig farms and other businesses that were designated as dirty and disease-ridden, until the courts ruled the policy was unconstitutional. So the authorities did the next best thing: they launched mass raids on Chinese homes and businesses, saying it was time to stop their opium use.

Harry Anslinger did not create these underlying trends. His genius wasn’t for invention: it was for presenting his agents as the hand that would steady all these cultural tremblings.

The drug war was born in the United States—but so was the resistance to it. Right at the start, there were people who saw that the drug war was not what we were being told. It was something else entirely. Harry Anslinger wanted to make sure we would never put these pieces together.

In Los Angeles, there was a doctor in the early 1930s named Henry Smith Williams who shared all of Harry Anslinger’s hatreds. He said that addicts were “weaklings” who should never have been brought into the world and wrote that “the idea that every human life has genuine value . . . and therefore is something to be treasured, is an absurd banality. The world would be far better off if forty percent of its inhabitants had never been born.” In his view, drugs led only to destruction, and nobody should take them, ever.

Henry’s brother Edward on the other hand, couldn’t bear to see addicts suffering—not when he knew there was a way to stop their pain. That is why he had helped to set up this clinic—and why he was about to be ruined. “Can the doctor do nothing? Oh yes, the doctor knows just what should be done,” he explained. “He knows that he has but to write a few words on the prescription blank that lies at his elbow, and the patient, tottering to the nearest drug store, will receive the remedy that would restore him miraculously to a semblance of normality and the actuality of physical and mental comfort.” He can provide a legal prescription for the drug to which the patient has become addicted. It will not damage his body: all doctors agree that pure opiates do no harm to the flesh or the organs. The patient, after taking the drug, will become calm. He will be able to function again. He will be able to work, or support a family, or love.

Edward was one of the 20,000 doctors illegally arrested for prescribing drugs. As he watched his brother’s career being destroyed by the police, Henry remembered something that now seemed to him, for the first time, to be significant. Before it became a crime to sell drugs, he had many patients who used them—but things had been very different then. They had bought their opiates, including morphine and heroin, at a low price from their local pharmacist. They were sold in bottles as “remedies” or “little helpers,” for everything from a chest infection to the blues.

There were many women who used opiates in the form of “syrups” every day who, he said, “would have gone on their hands and knees to pray for a lost soul had they seen cigarette stains on the fingers of a daughter.

Just as a large majority of drinkers did not become alcoholics, a large majority of users of these products did not become drug addicts. They used opiates as “props for the unstable nervous system,” like a person who drinks wine at the end of a stressful day at work.

A small number did get hooked—but even among the addicted, the vast majority continued to work and maintain relatively normal lives. An official government study found that before drug prohibition properly kicked in, three quarters of self-described addicts (not just users—addicts) had steady and respectable jobs. Some 22% of addicts were wealthy, while only 6% were poor. They were more sedate as a result of their addiction, and although it would have been better for them to stop, they were rarely out of control or criminal.

Doctors saw the results of the policy changes. “Here were tens of thousands of people, in every walk of life, frantically craving drugs that they could in no legal way secure,” Henry wrote. “They craved the drugs, as a man dying of thirst craves water. They must have the drugs at any hazard, at any cost. Can you imagine that situation, and suppose that the drugs will not be supplied? . . . [The lawmakers] must have known that their Edict, if enforced, was the clear equivalent of an order to create an illicit drug industry. They must have known that they were in effect ordering a company of drug smugglers into existence.” The drug dealer could now charge extortionate prices. In the pharmacies, morphine had cost two or three cents a grain; the criminal gangs charged a dollar.

The world we recognize now—where addicts are often forced to become criminals, in a desperate scramble to feed their habit from gangsters—was being created, for the first time. The Williams brothers had watched as Anslinger’s department created two crime waves. First, it created an army of gangsters to smuggle drugs into the country and sell them to addicts. In other words: while Harry Anslinger claimed to be fighting the Mafia, he was in fact transferring a massive and highly profitable industry into their exclusive control. Second, by driving up the cost of drugs by more than 1,000%, the new policies meant addicts were forced to commit crime to get their next fix. “How was the average addict—revealed by the official census as an average person—to secure 10 or 15 dollars a day to pay for the drug he imperatively needed?” Henry Smith Williams asked. “Can you guess the answer? The addict could not get such a sum by ordinary means. Then he must get it by dubious means—he must beg, borrow, forge, steal.” The men, he wrote, usually became thieves; the women often became prostitutes.

When the Harrison Act banning heroin and cocaine was written in 1914, it contained a very clear and deliberately designed loophole. It said that doctors, vets, and dentists had the right to continue giving out these drugs as they saw fit—and that addicts should be dealt with compassionately in this way. Yet the loophole was tossed onto the trash heap of history, as if it didn’t exist—until Edward Williams decided to dig it out and act on it. He helped to build a free clinic for addicts, and he volunteered his own time there. He wrote his prescriptions for whoever needed them. And he waited to see the results. Even he was surprised by what he saw. Patients who had come in as unemployed physical wrecks were able, slowly and steadily, to go back to work, support their families, and look after themselves again, just as they had before drugs were criminalized. The order and calm that had existed before narcotics prohibition started to return to their neighborhoods. The mayor of Los Angeles came out and celebrated the clinic as a great gift to the city, and the local federal prosecutor announced that these clinics accomplished “more good . . . in one day than all the prosecutions in one month.

After the clinic in Los Angeles closed and doctors like Edward Williams were busted, almost all the addicts lost their jobs31 and were reduced once again to constant scrambling for the money for a fix. They fell into crime and homelessness, and dozens of them died. The bureau was defying the clear ruling of the Supreme Court33 that the Harrison Act allowed doctors to prescribe to addicts, but “the Supreme Court has no army to enforce its decisions,” the press noted with a shrug.

Some 20,000 doctors were charged with violating the Harrison Act alongside Edward Williams, and 95% were convicted. Most were charged massive fines, but some faced five years in prison for each and every prescription written. In many places, horrified juries refused to convict, because they could see the doctors were only treating the sick as best they could. But Anslinger’s crackdown continued with full force.

The doctors were so emotional, Harry insisted, because they were corrupt. Don’t be fooled: they only wanted the money from drug addicts’ prescriptions. They were missing the hard cash, he said, and nothing more.

Besides, he said, he had proof that his way worked. Since the bureau’s crackdown began, the number of addicts had fallen dramatically, to just 20,000 in the whole country. Years later, a historian named David Courtwright put in a Freedom of Information request to find out how this figure was calculated—and found that it was simply made up. The Treasury Department’s top officials had privately said it was “absolutely worthless.

Henry Smith Williams urged the public to ask: Why would gangsters pay the cops to enforce the drug laws harder? The answer, he said, was right in front of our eyes. Drug prohibition put the entire narcotics industry into their hands. Once the clinics were closed, every single addict became a potential customer and cash cow.

Harry worked very hard to keep the country in a state of panic on the subject of drugs so that nobody would ever again see these logical contradictions. Whenever people did point them out, he had them silenced.

Henry Smith Williams was never the same after these experiences. Before, he saw the majority of human beings as feeble dimwits who barely deserve life. But he started to argue that humans didn’t have to be engaged in a brutal Darwinian war of survival after all; instead, we can choose kindness in place of crushing the weak. He spent his remaining years setting up a group to campaign for an end to the drug war, but Anslinger’s men wrote to everyone who expressed an interest in it, warning them it was a “criminal organization” that was “in trouble with Uncle Sam.” Henry Smith Williams died in 1940. Drug Addicts Are Human Beings remained out of print and largely forgotten for the rest of Anslinger’s life, and ours.

The book contained a prediction. If this drug war continues, Henry Smith Williams wrote, there will be a five-billion-dollar drug smuggling industry in the United States in fifty years’ time. He was right almost to the exact year.

While Harry Anslinger was shutting down all the alternatives to the drug war in the United States, across the rest of the world, drugs were still being sold legally. Over the next few decades, this began to end—and by the 1960s, they were banned everywhere. At first, I assumed this was because every country had its own local fears and its own local Anslingers.

But the truth is that Anslinger brought every other nation into line. He issued letters with orders all over the world—including to my country, Britain. He acted as the first “drug czar” not just for the United States, but for the world.

Once the doctors were whipped into line, there was one thing left that puzzled Harry. He was doing all the right things. He was cracking down on addicts and doctors and dealers.  Yet Baltimore was not becoming a drug-free paradise.

The Communists, he declared, were clearly flooding America with drugs, as part of a “cold, calculated, ruthless, systematic plan to undermine” America.  Harry warned sternly, every addict was not only a criminal and a thug. He was also a potential Communist traitor.

His agents told him none of these claims were true. One of them later gave an interview in which he said: “There was no evidence for Anslinger’s accusations, but that never stopped him.” But once again, Harry had tapped into the deepest fears of his time and ensured that they ran right through his department, swelling his budget as they went. Whatever America was afraid of—blacks, poor people, Communists—he showed how the only way to deal with the fear was to deal with drugs, his way.

By conjuring this Communist conspiracy into existence in the 1950s, Harry found a way to turn his failure into a reason to escalate the war. Drug prohibition would work—but only if it was being done by everyone, all over the world. So he traveled to the United Nations with a set of instructions for humanity: Do what we have done. Wage war on drugs. Or else. Of all Harry’s acts, this was the most consequential for us today.

Thailand flatly refused to ban opium smoking, on the grounds that it was a long-standing tradition in their country, and less harmful than prohibition. So Harry started to twist arms. One of his key lieutenants, Charles Siragusa, boasted: “I found that a casual mention of the possibility of shutting off our foreign aid programs, dropped in the proper quarters, brought grudging permission for our operations almost immediately.” Later, leaders were threatened with being cut off from selling any of their countries’ goods to the United States.

Whenever any representative of another country tried to explain to him why these policies weren’t right for them, Anslinger snapped: “I’ve made up my mind—don’t confuse me with the facts.” And so Thailand caved. Britain caved. Everyone—under threat—caved in the end. The United States was now the most powerful country in the world, and nobody dared defy them for long. Some were more willing than others. Pretty much every country has its own minority group, like African Americans, whom it wants to keep down. For many, it was a good excuse. And pretty much every country had this latent desire to punish addicts

His private files started to warn in frantic tones that addicts were “contagious,” and that any one of us could be infected if they were not immediately “quarantined.

Although nobody was told at the time, Harry in fact had a mental breakdown and had to be hospitalized. When he returned, his paranoia only seemed to have grown. He saw enemies and plots and secret attempts to control the entire world around every corner. How could a man like this have persuaded so many people?

They wanted to be persuaded. They wanted easy answers to complex fears. The public wanted to be told that these deep, complex problems—race, inequality, geopolitics—came down to a few powders and pills, and if these powders and pills could be wiped from the world, these problems would disappear.

This is a logic that keeps recurring throughout human history, from the Crusades to the witch hunts to the present day. It’s hard to sit with a complex problem, such as the human urge to get intoxicated, and accept that it will always be with us, and will always cause some problems (as well as some pleasures). It is much more appealing to be told a different message—that it can be ended. That all these problems can be over, if only we listen, and follow.

After Harry finally retired from running the bureau—with a little nudge from JFK—they discovered something odd about Harry’s paranoia. It turns out it had been pointed in every direction except where it would have been deserved—at his own department. Immediately after he finally stood down, an investigation by a special team from the Internal Revenue Service found that the bureau was not free from corruption, leading historian John McWilliams to claim that, “the bureau itself was actually the major source of supply and protector of heroin in the United States.

Years later, in 1970, Playboy magazine arranged a roundtable debate of the drug laws and invited him to take part. For the first time since he sat down with Henry Smith Williams in the 1930s, Harry Anslinger was forced to defend his arguments against articulate opponents. They included the psychiatrist Dr. Joel Fort, the lawyer Joseph Oteri, and the poet laureate of narcotics, William Burroughs.

Anslinger started to try to compete with their world of factual claims, saying: “I challenge you to name one doctor who has reported a beneficial effect of marijuana, outside of the backward areas of the world.” He was immediately answered with names: Dr. Lloyd J. Thompson, professor of psychiatry at Bowman Gray School of Medicine, and George T. Stocking, one of Britain’s leading psychiatrists. Again, Anslinger had no response. This kept happening in a strange fox-trot of debunking. Anslinger asserted; the experts rebutted; Anslinger fell silent. When feeling met fact, he was stumped. And then Anslinger snapped. He started calling everybody at the table around him “utterly monstrous” and said they were talking “vicious tripe” and must have a “disordered mind.” Then he compared them to Adolf Hitler, and finally spluttered: “We’ve been hearing some of the most ridiculous statements that have ever been made.

Dr. Fort looked over at Anslinger’s vast bald head and replied. “You have led this country to treat scientific questions,” he said, “the way such matters were handled in the Middle Ages.

The first man to really see the potential of drug dealing in America was a gangster named Arnold Rothstein—and I slowly realized it was possible to piece him back together in quite a lot of detail. He was so egotistical he actually invited journalists to write about him—and he was so powerful he didn’t worry about the police reading it. He owned them. There have been a number of biographies written of him, and even more important, I found out that after he died, his wife wrote a detailed memoir of her life with him, explaining exactly what he was like, in lush novelistic detail. There was only one problem. Every copy of his wife’s memoir seemed to have disappeared. Even the copy at the New York Public Library had vanished sometime in the 1970s. I eventually tracked down what seems to be the only remaining copy, in the Library of Congress,

Everybody in New York City knew that Rothstein could have you killed just by snapping his fingers—and that he had bought so many NYPD cops and politicians that he would never be punished for it.

“There are two million fools to one brainy man.” He was the brainy man, and he was going to get his due from the fools. And the Brain—as he now insisted on being called—soon discovered the greatest truth of gambling: the only way to win every time is to own the casino. So he set up a series of underground gambling dens across New York City, and when they got busted, one after another, he invented the “floating” craps game: a never-ending craps shoot that skipped from shadowy venue to dusky basement across the island. He carried the cash on him, up to a hundred thousand dollars at a time, and he obsessively counted the money, by hand, again and again.

At the racetrack, he would pay jockeys to throw the race, and gradually, year by year, he took this to a higher level. The bets got bigger and his winnings got more improbable, until he finally reached the biggest, most watched, most adrenaline-soaked game in America: the World Series. Fifty million Americans were following the result in 1919 when, against all the odds and every prediction, the Cincinnati Reds beat the far-and-away favorites, the White Sox. Long after the gasps were silent and the stadium was full only of echoes, the reason emerged: Rothstein had paid eight White Sox players to throw the match. All eight players were charged with fraud—and all were mysteriously acquitted.

Arnold was handed two of the largest industries in America, tax-free. He immediately spotted that the prohibition of booze and drugs was the biggest lottery win for gangsters in history. There will always be large numbers of people who want to get drunk or high, and if they can’t do it legally, they will do it illegally.

“Prohibition is going to last a long time and then one day it’ll be abandoned,” Rothstein told his associates. “But it’s going to be with us for quite a while, that’s for sure. I can see that more and more people are going to ignore the law . . . and we can make a fortune meeting this need.

Under prohibition, dealers were starting to discover, you can sell whatever crap you want: Who’s going to complain to the police that they were poisoned by your illicit booze? Outbreaks of mass alcohol poisoning spread across America: in one incident alone, 500 people were permanently crippled in Wichita, Kansas. But the market for illegal alcohol would live on for thirteen years, and then Franklin Roosevelt—desperate for new sources of tax revenue—would make it legal again in 1933. The greater gift, Rothstein saw, was in the market for drugs. They, surely, would stay banned far into the future.

He sent his men to buy heroin in bulk in Europe, where factories could still legally make it, shipped it over, and then distributed it to street sellers across New York and beyond. For his system to work, Rothstein had to invent the modern drug gang. There had been gangs in New York City for generations, but they were small-time hoodlums who spent most of their energy beating each other up. Arnold’s gangs were as disciplined as military units, and he made sure they had only one passion: the bottom line. That is how, by the mid-1920s, Rothstein and his new species of New York gang controlled the entire trade in heroin and cocaine on the Eastern seaboard of the United States.

Arnold soon discovered that when you control the massive revenue offered by the drug industry, individual police and politicians are easy to buy. His profit margins were so vast he could outbid the salaries cops earned from the state. “The police,” a journalist wrote in 1929, “were as gracious to him as they were to a police commissioner.” This is why every time Arnold Rothstein was caught committing violence, the charges “mysteriously” vanished.

Arnold tamed the police with an approach that, years later, would be distilled by his successors, the Mexican drug cartels, into a single elegant phrase: plata o plomo. Silver or lead.

When two detectives, John Walsh and Josh McLaughlin, broke into one of Rothstein’s illegal dens one night, he shot at them, suspecting they were robbers. The judge dismissed the case. A journalist asked: What’s “a little pistol practice with policemen as targets” when you are Arnold Rothstein?

When a popular product is criminalized, it does not disappear. Instead, criminals start to control the supply and sale of the product. They have to get it into the country, transport it to where it’s wanted, and sell it on the street. At every stage, their product is vulnerable. If somebody comes along and steals it, they can’t go to the police or the courts to get it back. So they can only defend their property one way: by violence. But you don’t want to be having a shoot-out every day—that’s no way to run a business. So you have to establish a reputation: a reputation for being terrifying. People must believe that you are so violent and brutal that they are too afraid to even try to pick a fight with you. You can only establish that reputation with attention-grabbing acts of brutality. The American sociologist Philippe Bourgois would give this process a name: “a culture of terror.” But the first person to notice and begin to articulate this dynamic was a half-drunk, nicotine-encrusted tabloid journalist, Donald Henderson Clarke, whose beat was to hang out in bars, from Midtown to the Bowery, with Rothstein and his fellow thugs. It is hard, he wrote, to convey “the fear with which Rothstein was regarded. Get in bad with a Police Commissioner, or a District Attorney, or a Governor, or anyone like that and you could figure out with a fair degree of certainty what might happen to you on the basis of what you had done.

Rothstein’s domination of the East Coast drug trade shattered as that trigger was pulled—from that moment on, drug dealers would be engaged in a constant conflict to control the distribution of drugs.

Arnold Rothstein is the start of a lineup of criminals that runs through the Crips and the Bloods and Pablo Escobar to Chapo Guzman—each more vicious because he was strong enough to kill the last. As Harry Anslinger wrote in 1961: “One group rose to power over the corpses of another.

Like Rothstein, Harry Anslinger is reincarnated in ever-tougher forms, too. Before this war is over, his successors were going to be deploying gunships along the coasts of America, imprisoning more people than any other society in human history, and spraying poisons from the air across foreign countries thousands of miles away from home to kill their drug crops.

There was once only one Arnold Rothstein in New York City. In the seven decades of escalating warfare ever since, there has come to be an Arnold Rothstein on every block in every poor neighborhood in America.

Chino’s crack came in white slivers that looked like chips of soap. At first, he stashed them in his mouth, but they made his cheeks and tongue go numb. Then he held them in his hand, but they started to dissolve, and nobody wanted to buy that. So he learned you had to get creative. He sometimes stuck them under a nearby parked car, attached to a magnet. Later, he got a collar for his pit bull, Rocky, and kept the crack in his collar—“so Rocky sold crack, too,” he laughed. But on that day—and the endless days like it—they were in his cap and up for sale.  Their crew was part of a wider network called Brooklyn’s Most Wanted, who controlled the Thirties in Flatbush. He got his drugs from Peter, a guy in his twenties from Chino’s block, and he answered to him. Peter first approached him when Chino was thirteen, asking if he wanted to make a lot of cash. He explained: you take the bags, you work the corner, you keep up to $500 a week. After that, everybody knew he was under Peter’s protection. You couldn’t touch him without retaliation from Peter, and he was one of the three or four biggest dealers between Utica and Flatbush. It meant Chino had power, and respect, and a name, and as much freedom from fear as he would ever get.

To protect this way of life, you have to be terrifying. As we learned under Rothstein, you can’t go to the police to protect your property or your trade. You have to defend it yourself, with guns and testosterone. If you ever crack and show some flicker of compassion, he tells me years later, “everybody’s going to fucking rob you . . . They’ll just move in on your turf, take over your block, do whatever they want to you. You have to be fucked up to survive in this fucked-up paradigm . . . You got to be violent to not have violence done to you . . . You set examples. You make examples out of people. Some of them are completely justified and called for. A lot of them are not.

So the crew shot at trees, shot in the air, killed animals. Sometimes Chino would shoot in the direction of people—rival crews he needed to scare shitless. He will tell me that his bullets never hit them. He will also tell me there are things he can never tell anyone.

Two of their rival gangs were called the Autobots and the Decepticons, after the Transformer toys that were popular at the time,

One time, some older men arrived on the block to try to claim it as theirs. Chino remembers it this way: “We had some cats come through . . . some older cats . . . we welcomed them, smoked with them, laughed with them. Basically, they were trying to son us [that is, treat them like kids—like their sons]—tell us what to do as if we didn’t have our own set. Some altercation happened between them and one of my soldiers, and before you know it, we was beating their ass . . . We jumped them . . . and beat the shit out of them. We hit them with bottles, garbage cans, and we let them run out of the neighborhood and told them to never come back.” About this need to defend his teenage crew against older aggressors, he says: “It’s almost like in the animal kingdom—it’s no different in terms of how our minds are . . . They thought they were the bigger, older lions . . . but we’re not necessarily lions, we’re like packs of hyenas. If you’re going to play by animal kingdom rules, you got to know the right animal.

Chino had to deal with Smokie. He had pulled the crew into danger and then vanished. When he skulked toward Chino after it was all over, he claimed he had run to get a gun to defend them—but Chino couldn’t make allowances for cowardice, not here. The crew took him to the 235 Park nearby, a grassy patch, and poured water on his shirt. Then Chino took off his belt, and he lashed Smokie, thirty-one times. That was the standard first phase of punishment for cowardice. Then he had to embark on the second phase. He had to go find the opposing set and slash one of them. Smokie staggered off—but something went wrong. He didn’t slash a rival. Terrorized and half-crazed and hyped, he looked for anyone he could attack—and he slashed an old man in a store, which isn’t what Chino wanted at all. Soon he was back in prison. Chino was furious: the point he needed to be made was that his set was strong and nobody should ever try and fuck with them or take their drugs or mock their status. By attacking an old person, he says, he “actually made us look weaker.

When we hear about “drug-related violence,” we picture somebody getting high and killing people. We think the violence is the product of the drugs. But in fact, it turns out this is only a tiny sliver of the violence. The vast majority is like Chino’s violence—to establish, protect, and defend drug territory in an illegal market, and to build a name for being consistently terrifying so nobody tries to take your property or turf.

Just as the war on alcohol created armed gangs fighting to control the booze trade, the war on drugs has created armed gangs fighting and killing to control the drug trade. The National Youth Gang Center has discovered that youth gangs like the Souls of Mischief are responsible for between 23 and 45 percent of all drugs sales in the United States.

Chino had always, he told me, been puzzled by one thing about his mother. Since she was openly a lesbian, how did she end up becoming pregnant—and by a cop, the species of man she had good reason to loathe the most? He found out the answer when he was thirteen. He explained his confusion to his aunt, Rose, who then offered, coldly, a story. In 1980, Chino’s mother, Deborah, was raped by his father, Victor. Deborah was a black crack addict. Victor was a white NYPD officer, there to arrest her. So Chino is a child of the drug war in the purest sense.

He was conceived on one of its battlefields. Chino had already known the vague outlines of his mother’s life. He constructed a story that strung together his own fragmented memories of her and the hushed conversations he overheard from his relatives. Deborah was abandoned by her biological mother in the hospital as soon as she was born—perhaps because her mother was herself a drug addict.

Long after, Chino will describe this, the night of his conception, with a controlled anger. Cops could rape with impunity “because who’s going to believe a drug addict, right? Who’s going to believe somebody who’s addicted to a substance and will do anything to get that substance, including lie? Who’s going to believe somebody who’s been in and out of prison the majority of their adult life?

Chino was first put into a jumpsuit and caged when he was thirteen. He was sent to Spofford Juvenile Detention Facility in the Bronx as punishment for his violent “street shit” against other teenagers, which he carried out because “the dealing puts me in positions where my default emotion is anger and my default position is retaliation.

Nobody tried to talk to him about why he was there. Their manner wasn’t cold or aggressive: it was utterly indifferent. In this child prison, you could watch TV, watch TV, or watch TV. Oh—or you could play Spades. Chino remembers: “To say I felt alone would be an understatement. I felt like an animal . . . When you go to prison, the one thing you got to check at the door is not your wallet or your jewelry. It’s your humanity.” He was being taught, in stages, that life is a series of shakedowns and shoot-outs, punctuated by boredom.

In prison, “being humane can get you fucking hurt . . . Simple shit like, [if] you’re home in the world and somebody knocks on your door and says, ‘Can I borrow some toothpaste, a cup of sugar?’ you’re like—why not? It’s fucking sugar. Who cares? Take the whole fucking thing . . . You don’t do that shit in jail . . . You can’t do that shit. That just opens up the door for a lot of bullshit . . . People thinking you’re a punk and they can just take from you. It’s called friendly extortion. It’s like . . . ‘I know you want to give me that, right? I know you want to give me a pack of cigarettes.’

As Chino guided me through his world, I kept thinking about the parts of ghetto culture that seem irrational and bizarre to outsiders—the obsession with territory, the constant demand for “respect.” And I began to think maybe they are not so irrational. You have no recourse to the law to protect your most valuable pieces of property—your drug supply—so you have to make damn sure people show you respect and stay out of your territory. The demand for respect, I began to see, is the only way this economy can function. If enough of the local economy is run by these rules, they come to dominate the neighborhood, even the people who manage to stay out of the drug trade.

But the role of the drug war went deeper into Chino’s story than that—to its very start. In the midst of all this violence—gang-on-gang, gang-on-police, police-on-gang, police-on-anyone-in-gang-areas—the rape of an addict like Deborah became something that passed unpunished. It was “not only normalized,” Chino said, “but accepted. And accepted in such an insidious way that it’s almost overlooked . . . There’s no level of humanity that it’s acceptable for these people to be treated” with. Instead, they are viewed “in this very degrading, almost animalistic way . . . It’s not just there’s no sense of justice—[there’s] no sense they need justice. They’re so far down on the human level that justice doesn’t even apply to them. That’s one of the most tremendous impacts in the drug war.

Professor Jeffrey Miron of Harvard University has shown that the murder rate has dramatically increased twice in U.S. history—and both times were during periods when prohibition was dramatically stepped up. The first is from 1920 to 1933, when alcohol was criminalized. The second is from 1970 to 1990, when the prohibition of drugs was dramatically escalated. In both periods, people like Chino responded to the incentives to be terrifying and to kill, in order to control an illegal trade. By the mid-1980s, the Nobel Prize–winning economist and right-wing icon Milton Friedman calculated that it caused an additional 10,000 murders a year in the United States. That’s the equivalent of more than three 9/11s every single year. Professor Miron argues this is an underestimate. Take the drug trade away from criminals, he calculates, and it would reduce the homicide rate in the United States by between 25-75%.

Beyond Chino Hardin, there is another layer of gangsters controlling the neighborhood. Beyond them is a network of smugglers who transported the drugs from the U.S. border to New York. Beyond them is a mule who carried them across the border. Beyond them is a gang controlling the transit through Mexico, or Thailand, or Equatorial Guinea. Beyond them is a gang controlling the production in Colombia, or Afghanistan. Beyond them is a farmer growing the opium or coca. And at every level, there is a war on drugs, a war for drugs, and a culture of terror, all created by prohibition.

 

I interviewed 16 current or former law enforcement officials, from the Swiss mountains to the U.S.-Mexico borde.

At the beginning of the 21st century, Leigh Maddox was standing on the I-95, the long stretch of highway that leads into Baltimore. She was a police captain with long hair and a short temper. Her men were waging the war on drugs by pulling over cars and hunting through them for contraband. Leigh had been busting people for drug possession like this for years. Her cops had clear orders: Go for numbers. Get the maximum possible arrests. Don’t worry about how severe the offense is. If a person is found with any drugs at all, even the tiniest roach, bust them. She was Anslinger’s dream girl made flesh.

Leigh’s support for the drug war was an act of compassion. She genuinely believed that she was making the world a better place by protecting people from drugs and drug gangs. She is a kind and decent person, and that is what drove her to fight the drug war.

Her officers all knew they could seize the property of anyone they arrested for drug offenses to be auctioned off, with much of the proceeds—usually 80 percent—going straight back into the local police budget. “So if you stop a car [and search it and find], say, four million [dollars in cash]—not unusual—shit, that’s good,” Leigh said.

The prisons were crammed with people serving the harshest possible sentences. The streets were militarized.

Yet all over the United States—all over the world—police officers were noticing something strange. If you arrest a large number of rapists, the amount of rape goes down. If you arrest a large number of violent racists, the number of violent racist attacks goes down. But if you arrest a large number of drug dealers, drug dealing doesn’t go down.

When Levine was told to go to one of the most notorious drug-selling corners in Manhattan—near the top of Ninety-Second Street—and “clean up that damned corner, once and for all,” he was delighted. In a long surveillance operation, his team identified 100 likely street dealers within 50 feet who work from the moment the sun falls to the moment the sun rises. Within two weeks, he had busted around 80% of them. He was satisfied, and for a couple of days, there was less drug activity. But within a week, everything was back to normal, “as if we had never been there,” as Levine puts it in his writing. Why? Because “as every dealer knows, if he is arrested, there are hundreds right behind him ready to take his place.” He asked himself: “If all those cops and agents couldn’t get this one corner clean, what is the purpose of this whole damned drug war?

Back on the roads running into Baltimore, Leigh was discovering something that was going to change her life. It was even worse than Levine suspected. It’s not just that arresting dealers doesn’t cause any reduction in crime. Whenever her force arrested gang members, it appeared to actually cause an increase in violence, especially homicides. At first this puzzled her, but it was a persistent pattern. Why would arresting drug dealers cause a rise in murders? Gradually, she began to see the answer. “So what happens is we take out the guy at the top,” Leigh explains, so “now, nobody’s in charge, and [so the gangs] battle it out to see who’s going to be in charge.

Leigh was beginning to realize that while she went into this job determined to reduce murder, she was in fact increasing it. She wanted to bust the drug gangs, but in fact she was empowering them.

The 1993 National Household Survey on Drug Abuse found that 19 percent of drug dealers were African American, but they made up 64 percent of the arrests for it. Largely as a result of this disparity, there was an outcome that was more startling still. In 1993, in the death throes of apartheid, South Africa imprisoned 853 black men per hundred thousand in the population. The United States imprisons 4,919 black men per hundred thousand (versus only 943 white men).

At any given time, 40 to 50% of black men between the ages of 15 and 35 are in jail, on probation, or have a warrant out for their arrest, overwhelmingly for drug offenses. You have pressure on you from above to get results.  

We humans are good at suppressing our epiphanies, especially when our salaries and our friendships depend on it. She knew that a big chunk of her police department’s budget ran on the money they got from seizing drug suspects’ property. What would happen to all their jobs if that were taken away from the cops? She deliberately kept herself so busy that “I just didn’t have any time to think about it.” As she explained this to me, I realized that for Chino and for Leigh, all the incentives laid out by prohibition were to keep on fighting their wars and shooting their guns and ignoring their doubts.

Leigh discovered she was not alone. A friend told her about a group called Law Enforcement Against Prohibition (LEAP), an organization of cops and judges and prison officers fighting to end the drug war so they can bankrupt the drug gangs.

Once you have been busted for a drug offense you are virtually unemployable for the rest of your life. You will never work again. You will be barred from receiving student loans. You will be evicted from public housing. You will be barred from even visiting public housing. “Say your mother lives in public housing, and you get arrested for possession, and you go visit her,” Leigh says. “If the housing authority find out you’ve been there [they will say] you’ve violated the lease and they’ll kick [the whole family] out.” I kept meeting people like this across the United States—second-class citizens, stripped even of the vote, because at some point in the past, they possessed drugs.

Why Anslinger killed Billie Holiday

Jazz was the opposite of everything Harry Anslinger believed in. It is improvised, and relaxed, and free-form. It follows its own rhythm. Worst of all, it is a mongrel music made up of European, Caribbean, and African echoes, all mating on American shores. To Anslinger, this was musical anarchy, and evidence of a recurrence of the primitive impulses that lurk in black people, waiting to emerge.

Harry took jazz as yet more proof that marijuana drives people insane.

Anslinger looked out over a scene filled with men like Charlie Parker, Louis Armstrong, and Thelonious Monk, and—as the journalist Larry Sloman recorded—he longed to see them all behind bars. He wrote to all the agents he had sent to follow them, and instructed: “Please prepare all cases in your jurisdiction involving musicians in violation of the marijuana laws. We will have a great national round-up arrest of all such persons on a single day. I will let you know what day.” His advice on drug raids to his men was always “Shoot first.”

He reassured congressmen that his crackdown would affect not “the good musicians, but the jazz type.” But when Harry came for them, the jazz world would have one weapon that saved them: its absolute solidarity. Anslinger’s men could find almost no one among them who was willing to snitch, and whenever one of them was busted, they all chipped in to bail him out. In the end, the Treasury Department told Anslinger he was wasting his time taking on a community that couldn’t be fractured, so he scaled down his focus until it settled like a laser on a single target—perhaps the greatest female jazz vocalist there ever was.

Billie Holiday was born a few months after the Harrison Act, the first law banning cocaine and heroin, and it would become her lifelong twin. Not long after Billie’s birth, her nineteen-year-old mother, Sadie, became a prostitute, while her seventeen-year-old father vanished. He later died of pneumonia in the South because he couldn’t find a hospital that would treat a black man. Billie brought herself up on the streets of Baltimore, alone, defiant.

The last address she had been given, only to find it was a brothel. Her mother worked there for a pittance and had no way to keep her. Before long, Billie was thrown out, and she was so hungry she could barely breathe without it hurting. There was, Billie came to believe, only one solution. A madam offered her a 50% cut for having sex with strangers. She was 14 years old. Before long, Billie had her own pimp. He was a violent, cursing thug named Louis McKay, who was going to break her ribs and beat her till she bled. He was also—perhaps more crucially—going to meet Harry Anslinger many years later, and work with him.

Billie was caught prostituting by the police, and once again, instead of rescuing her from being pimped and raped, they punished her. She was sent to prison on Welfare Island, and once she got out, she started to seek out the hardest and most head-blasting chemicals she could. At first her favorite was White Lightning, a toxic brew containing 70-proof alcohol, and as she got older, she tried to stun her grief with harder and harder drugs. One night, a white boy from Dallas called Speck showed her how to inject herself with heroin. You just heat up the heroin in a spoon and inject it straight into your veins. When Billie wasn’t drunk or high, she sank into a black rock of depression and could barely speak. She would still wake in the night screaming, remembering her rape and imprisonment. “I got a habit, and I know it’s no good,” she told a friend, “but it’s the one thing that makes me know there’s a person called Billie Holiday. I am Billie Holiday.

One day, starving, she walked a dozen blocks in Harlem, asking in every drinking hole if they had any work for her, and she was rejected everywhere. Finally she walked into a place called the Log Cabin and explained she could work as a dancer, but when she tried a few moves, it was obvious she wasn’t good enough. Desperate, she told the owner maybe she could sing. He pointed her toward an old piano man in the corner and told her to give him a song. As she sang “Trav’llin’ All Alone,” the customers put down their drinks and listened. By the time she finished her next song, “Body and Soul,” there were tears running down their cheeks.

Louis McKay graduated from being her pimp to being her “manager” and husband: he stole almost all her money. After her greatest performance at Carnegie Hall, he greeted her by punching her so hard in the face she was sent flying. Her story was about to crash into Harry Anslinger’s. He had been, it turned out, watching her very carefully.

When Billie sang “Loverman, where can you be?” she wasn’t crying for a man—she was crying for heroin. But when she found out her friends in the jazz world were using the same drug, she begged them to stop. Never imitate me, she cried. Never do this. She kept trying to quit.

Billie was busted again, she was put on trial. She stood before the court looking pale and stunned. “It was called ‘The United States of America versus Billie Holiday,’ ” she said, “and that’s just the way it felt.” She refused to weep on the stand. She told the judge she didn’t want any sympathy. She just wanted to be sent to a hospital so she could kick the drugs and get well. Please, she said to the judge, “I want the cure.” She was sentenced instead to a year in a West Virginia prison, where she was forced to go cold turkey and work during the days in a pigsty, among other places.

Now, as a former convict, she was stripped of her cabaret performer’s license, on the grounds that listening to her might harm the morals of the public. This meant she wasn’t allowed to sing anywhere that alcohol was served—which included all the jazz clubs in the United States.

Billie was finally silenced. She had no money to look after herself or to eat properly. She couldn’t even rent an apartment in her own name.

When she was forced to interact with people, she was becoming more and more paranoid. If Jimmy Fletcher had been one of Them, who else was? She believed—correctly, it turns out—that some of the people around her were informing on her to Anslinger’s army. “You didn’t know who to trust,” her friend Yolande Bavan told me. “So-called friends—were they friends? What were they?” Everywhere she went, there were agents asking about her, demanding details. She began to push away even her few remaining friends, because she was terrified the police would plant drugs on them, too—and that was the last thing she wanted for the people she loved.

When Billie Holiday stood on stage, her hair was pulled back tightly, her face was round and shining in the lights, and her voice was scratched with pain. It was on one of these nights, in 1939, that she started to sing a song that would become iconic: Southern trees bear a strange fruit, Blood on the leaves and blood at the root. Before, black women had—with very few exceptions—been allowed on stage only as beaming caricatures, stripped of all real feeling. But now, here, she was Lady Day, a black woman expressing grief and fury at the mass murder of her brothers in the South—their battered bodies hanging from the trees.

The audience listened, hushed. Many years later, this moment would be called “the beginning of the civil rights movement.” Lady Day was ordered by the authorities to stop singing this song. She refused.

He knew that to secure his bureau’s future, he needed a high-profile victory, over intoxication and over the blacks, and so he turned back to Billie Holiday. To finish her off, he called for his toughest agent—a man who was at no risk of falling in love with her, or anyone else [not excerpted from the book is a great story of an agent sent out to get her who falls in love with her instead].  Here’s a description of the stone-cold killer sent to replace him:  The Japanese man couldn’t breathe. Colonel George White—a vastly obese white slab of a man—had his hands tightened around his throat, and he was not letting go. Once it was all over, White told the authorities he strangled this “Jap” because he believed he was a spy. But privately, he told his friends he didn’t really know if his victim was a spy at all, and he didn’t care. “I have a lot of friends who are murderers,” he bragged years later, and “I had very good times in their company.” He boasted to his friends that he kept a photo of the man he had throttled hanging on the wall of his apartment, always watching him. So as he got to work on Billie, Colonel White was watched by his last victim, and this made him happy.

When he came for her on a rainy day at the Mark Twain Hotel in San Francisco without a search warrant, Billie was sitting in white silk pajamas in her room. This was one of the few places she could still perform, and she badly needed the money. She insisted to the police that she had been clean for over a year. White’s men declared they had found opium stashed in a wastepaper basket next to a side room and the kit for shooting heroin in the room, and they charged her with possession. But when the details were looked at later, there seemed to be something odd: a wastepaper basket seems an improbable place to keep a stash, and the kit for shooting heroin was never entered into evidence by the cops—they said they left it at the scene. When journalists asked White about this, he blustered; his reply, they noted, “appeared a little defensive.

Billie insisted the junk had been planted in her room by White, and she immediately offered to go into a clinic to be monitored: she would experience no withdrawal symptoms, she said, and that would prove she was clean and being framed. She checked herself in at a cost of one thousand dollars, and she didn’t so much as shiver.

George White, it turns out, had a long history of planting drugs on women. He was fond of pretending to be an artist and luring women to an apartment in Greenwich Village where he would spike their drinks with LSD to see what would happen. One of his victims was a young actress who happened to live in his building, while another was a pretty blond waitress in a bar. After she failed to show any sexual interest in him, he drugged her to see if that would change. “I toiled whole-heartedly in the vineyards because it was fun, fun, fun,” White boasted. “Where else [but in the Bureau of Narcotics] could a red-blooded American boy lie, kill, cheat, steal, rape and pillage with the sanction and blessing of the All-Highest?

One of the ambulance drivers recognized her, so she ended up in a public ward of New York City’s Metropolitan Hospital. As soon as they took her off oxygen, she lit a cigarette. “Some damn body is always trying to embalm me,” she said, but the doctors came back and explained she had an array of very serious illnesses: she was emaciated because she had not been eating; she had cirrhosis of the liver because of chronic drinking; she had cardiac and respiratory problems due to chronic smoking; and she had several leg ulcers caused by starting to inject street heroin once again. They said she was unlikely to survive for long—but Harry wasn’t done with her yet. “You watch, baby,” Billie warned from her tiny gray hospital room. “They are going to arrest me in this damn bed.” Narcotics agents were sent to her hospital bed and said they had found less than one-eighth of an ounce of heroin in a tinfoil envelope. They claimed it was hanging on a nail on the wall, six feet from the bottom of her bed—a spot Billie was incapable of reaching. They summoned a grand jury to indict her, telling her that unless she disclosed her dealer, they would take her straight to prison. They confiscated her comic books, radio, record player, flowers, chocolates, and magazines, handcuffed her to the bed, and stationed two policemen at the door. They had orders to forbid any visitors from coming in without a written permit, and her friends were told there was no way to see her. Her friend Maely Dufty screamed at them that it was against the law to arrest somebody who was on the critical list. They explained that the problem had been solved: they had taken her off the critical list. So now, on top of the cirrhosis of the liver, Billie went into heroin withdrawal, alone. A doctor was brought into the hospital at the insistence of her friends to prescribe methadone.

She was given it for ten days and began to recover: she put on weight and looked better. But then the methadone was suddenly stopped, and she began to sicken again. When finally a friend was allowed in to see her, Billie told her in a panic: “They’re going to kill me. They’re going to kill me in there. Don’t let them.” The police threw the friend out.

One day, her pimp-husband Louis MacKay turned up at the hospital—after informing on her—and ostentatiously read the Twenty-Third Psalm over her bed. It turned out he wanted her to sign over the rights to her autobiography to him, the last thing she still controlled. She pretended to be unconscious.

On the street outside the hospital, protesters gathered, led by a Harlem pastor named the Reverend Eugene Callender. They held up signs reading “Let Lady Live.” Callender had built a clinic for heroin addicts in his church, and he pleaded for Billie to be allowed to go there to be nursed back to health. His reasoning was simple, he told me in 2013: addicts, he said, “are human beings, just like you and me.” Punishment makes them sicker; compassion can make them well. Harry and his men refused. They fingerprinted Billie on her hospital bed. They took a mug shot of her on her hospital bed. They grilled her on her hospital bed without letting her talk to a lawyer.

 

Posted in Corruption, Drug wars and the prison system | Tagged , , | 4 Comments

Rob Mielcarski: You know you are in trouble when…

[ This is from the outstanding blog by Rob Mielcarski (un-denial.com) which you can see here.  I cant think of anything he’s left out…

Alice Friedemann   www.energyskeptic.com  author of “When Trucks Stop Running: Energy and the Future of Transportation”, 2015, Springer and “Crunch! Whole Grain Artisan Chips and Crackers”. Podcasts: Derrick Jensen, Practical Prepping, KunstlerCast 253, KunstlerCast278, Peak Prosperity , XX2 report ]

Examples of denial are both profound and unacknowledged.

The short-term solution to our problems is the long-term cause of our problems: economic growth

The long-term solution to our problems is the short-term cause of our problems: reduced consumption

All political parties in all countries and almost all citizens, including the few citizens that understand our predicament, reject our best course of action: austerity

Most citizens have no idea how fortunate they are to be alive at this point in history: Blindspots and Superheroes

Despite wildly different beliefs about our predicament, there is one thing that almost everyone agrees on: I don’t want to change my behavior

The only problems society does not acknowledge, or discuss, or act on, are the only problems that matter: species extinction, limits to growth, debt, peak oil, overshoot, resource depletion, climate change, sea level rise, fisheries collapse & ocean acidification, nitrogen imbalance & tree decline 

Every country has similar economic problems and not one leader anywhere in the world connects the dots and publicly acknowledges the root cause, even after they leave office: declining energy surplus a.k.a. energy extraction cost + debt

Citizens believe the exact opposite of reality: technology creates wealth and energy rather than energy creates wealth and technology

Citizens misunderstand the root cause of social unrest and wars because the media presents these conflicts as political or economic problems and ignores their underlying forces: biophysical constraints

There is evidence that feedback loops are taking over and causing some problems to go exponential: climate change, CO2 emissions, ice loss, sea level rise, debt

The previous year’s worst case predictions are tending to become this year’s most likely prediction: sea level rise

Actions that improve the long-term worsen the short-term: air pollution masks 0.5C of warming, austerity and debt reduction, renewable energy, population reduction 

The only possible permanent solution is rejected by the belief systems of 90+% of citizens: population reduction

The only possible permanent solution is too slow to avoid the worst problems: population reduction laws

Countries fortunate to have a low birth rate often cancel their good fortune with immigration: Canada

The few people who understand the severity of our problems do not set good examples in their personal lives: leaders, climate scientists, environmentalists

History suggests that the consequence of not voluntarily contracting our economies as non-renewable resources deplete is an unthinkable war, so we don’t think about it: nuclear weapons

The quality of our leaders is declining because those people with high intelligence, wisdom, and integrity do not want to be in charge of our predicament, and because citizens are feeling the impact of overshoot, do not understand what is going on, and are angry: Trump

The leader of the free world denies science and issues daily, jaw-dropping, cringe-inducing tweets: Trump

The one world leader that did understand the problem and spoke out was rejected by the citizens and no longer speaks out: Jimmy Carter

We do not acknowledge that the world’s economic problems began with the peaking of a key non-renewable resource: conventional oil

Low energy prices have led citizens to believe we have a glut of fossil energy when in fact: all types of energy have peaked

We do not discuss or act on economic history research that shows countries always get into serious trouble when they permit an important ratio to exceed a threshold we long passed: debt to GDP

Bankers, the creators of money, do not understand the one thing that creators of money should understand: thermodynamics of wealth

The professionals with the most influence on public policy use models that violate the most trusted laws of physics: economists

The scientific theory that explains the relationship between the economy, energy, and climate is ignored by everyone that should understand it: Tim Garrett

The people who deserve the most respect and admiration get the least: scientists

The people who deserve the least respect and admiration get the most: celebrities

All types of non-fossil energy do not provide a substitute for the only energy we can’t live without: diesel for trucks, trains, ships, tractors, and combines, and mining machines; plus natural gas for fertilizer

People who think the shale revolution will make America prosperous and energy independent ignore one thing: facts and more facts

Intelligent people who understand the climate change threats, like James Hansen and Bill Gates, and who want business as usual to continue, know that nuclear energy is the only option, but they ignore a problem: peak uranium

If climate deniers continue to win elections and try to maintain the existing electric grid they’ll find that strategy may not work for long: peak coal

A key component of our infrastructure appears durable but is not: reinforced concrete

Citizens most vulnerable to a fragile global supply chain with only a few days of inventory experience the strongest illusion of abundance and security: inhabitants of large cities

The “green” revolution, which increased food production to enable 7+ billion humans, was and is entirely dependent on fossil energy, and has long-term consequences that will make a return to traditional agriculture very difficult.

Most citizens are not even vaguely aware of the invention that enabled their existence and created about 50% of the nitrogen in their bodies: Haber-Bosch conversion of natural gas to fertilizer

Well meaning environmentalists demand that we stop subsidizing fossil energy companies without understanding the source of all that they cherish in modern civilization: fossil energy

Well meaning environmentalists demand that we stop subsidizing fossil energy companies without realizing that many fossil energy companies are going bankrupt: ExxonMobil

A solution frequently advocated makes things worse by accelerating growth and decreasing system resilience: efficiency

The best solution for removing CO2 from the atmosphere is being harmed by the same activity that creates CO2: planting more trees which are then injured or killed by ground level ozone

All climate science models that do not predict disaster now depend on an unproven technology that we probably can’t afford and other species definitely can’t afford: BECCS (bio-energy with carbon capture and storage)

We have not acted to prevent a predictable and very dangerous side effect of trying to maintain business-as-usual with low interest rates: increasing wealth gap

We still enjoy historically vast surplus wealth that could be deployed to improve our future lives but we are squandering it: military, airports, highways, new cars, high rises, etc.

Earth with its diverse complex life and a highly intelligent species is extraordinarily rare, precious, and worth fighting to protect, yet we dream of other barren homes: colonizing Mars

The tool that could be used to unite citizens in common purpose and useful action is instead being used to create tribes that reinforce preexisting beliefs: internet

Many people are hurting and lashing out in anger because they do not understand the cause of their pain: Brexit, Trump, Syria, Venezuela, etc.

The few sources of information that understand and communicate the truth are under threat: fake news

Few people study or heed the best predictor of the future: history

The majority of citizens share a common characteristic that makes the election of an intelligent and wise leader empowered to do the right thing unlikely: wacky beliefs

None of our schools teach skills useful and relevant to our future: growing food and other forms of lower complexity life skills

The thing that enabled the evolution of our high intelligence and its ability to understand and act on problems is the same thing that causes our problems and prevents us from acting on them: denial of reality

The theory that best explains our existence and our self-destructive behavior is ignored by everyone, including those people seeking to understand our problems: Varki and Brower’s denial of reality theory

Posted in Conserve Energy, Critical Thinking, Population, What to do | Tagged , | 11 Comments

Why didn’t any white collar corporate criminals go to jail after the crash?

[ This is a book review with excerpts of “The Chickenshit club: Why the justice department fails to prosecute executives”.  Here is how the author Eisinger summarizes the problem and consequences:

“Businesses now have privileges not seen since the Gilded Age. Executives make more money than ever. Corporate profits are at record highs. The courts are expanding corporate rights, as companies exert great political power and dominate our policy discourse. But the most valuable perquisite corporate officers possess is the ability to commit crimes with impunity. Such injustice threatens American democracy. Today the justice system is broken.”

Eisinger takes the reader on a journey of the good old days, when S&L, insider traders, Enron, and other white collar criminals went to jail, and how this was done, the expertise the Justice department used to have and why they’ve now become timid and soft on corporate crime.

Now there’s no trial, no jail, just a settlement amount.  The only payment is a fine – money subtracted from the shareholders, reduced wages, and increased consumer prices.  This does absolutely nothing to reform business, quite the opposite.  Not only is there no jail time, but executive retirement packages remain intact, there are no claw backs, no reason not to get even more greedy, and the company can write off some of the fine, since it’s tax deductible, and banks could earn credits for building affordable housing or helping mortgage holders, subtracting from the fine owed further.

Nor are there more regulations, or licenses pulled to enforce good behavior in the future.  

I think this is an important book because corruption will accelerate the consequences of declining oil and in and of itself makes it more likely that another crash and the end of democracy will happen sooner rather than later.

Here are some, but not all, of the reasons why CEOs and other high-level executives didn’t go to jail:

  1. Lack of staff, time, and expertise to flip lower level employees upward to the top
  2. The lack of technology made the DOJ far less effective and productive. The DOJ was woefully behind private industry. In 2003, the DOJ had old computers, no blackberries, no document management system, and no way even to email the FBI agents assigned to the investigation. With this pathetic setup, they were taking on the infernally complex company Enron in the most important corporate fraud case in memory, against a legion of defense lawyers from the best firms in the world.
  3. The decisions that led to getting a fast enormous monetary award being better than a slow many years-long trial
  4. The FBI used to help the Justice department, now their main focus is Homeland Security; a huge loss of expert investigative staff
  5. Of the 94 offices, the Southern District of New York, has the smartest and ablest prosecutors in the land. The other 93 are less competent.
  6. The rich and powerful are able to hire better paid and prepared lawyers than Department of Justice lawyers
  7. Banks and Wall Street increasingly rewrote financial rules for politicians to enact into law that made what were once illegal acts legal or arguable
  8. More was discussed live and less in emails to evade leaving a trail for the prosecution
  9. Public Relations firms were paid huge sums to spin positive news on the “bad” corporation.
  10. Prosecutors who took a hard line risked never getting more lucrative jobs in industry. Sheila Bair, who had headed up the FDIC and challenged the Obama administration over its bank bailouts, could not land a prominent corporate or administration position.
  11. Large fines did little to deter corporations from breaking the law. “Over 50% of the most serious fraud and larceny culprits were recidivists, about the same as robbery and firearms offenders and far higher than drug traffickers.”
  12. Settlements have another downside: they weaken prosecutorial skills, which over time becomes lost knowledge. Settlements breed investigative laziness and erodes trial skills.
  13. Many prosecutors are wealthy and were in their class, perhaps even their friends or in school together
  14. It’s risky to go to trial and have a hung jury
  15. Corporate responsibility is diffused; the top leadership of giant corporations make few day-to-day decisions and none without the advice of lawyers and accountants.
  16. Time and again, the government went after only one low-level employee.
  17. Proposals to expand prosecutorial power over white collar crime, extend the statute of limitations, expand the criminal code, expand the ability to punish corporate officers who harmed public health and safety, bank failures and their consequent job losses and economic devastation. None of these proposals were ever enacted.
  18. The justice department set up a new layer of bureaucracy, a compliance office, to evaluate corporate cooperation. Sounds good, but this extra layer made it even harder to bring cases against corporations or high-level individuals.
  19. A broad coalition of corporate interests led a fight against prosecutorial power. They forced the Department of Justice to stop using their tools and techniques to investigate companies.
  20. Trump made matters worse. He fired Sally Yates, the architect of the DOJ’s attempt to improve its prosecution of corporate crime. He appointed men who would eviscerate the Consumer Financial Protection Bureau and get rid of Dodd-Frank
  21. Senior officials take a pass on indictments because they are too inexperienced to judge the evidence. As the abilities of the FBI, SEC, and Justice Department corrode, they make blunders. The blunders make them more reluctant to pursue riskier paths such as prosecutions of powerful and well-defended individual corporate executives, which leads to more mistakes
  22. Corporate whistle-blowers had it even worse. Their lives were never the same. They faced divorce, financial ruin, and joblessness. They wondered whether it had been worth it. They wondered why they had been disbelieved so often by government investigators—when they had been interviewed at all.
  23. The Justice Department has been hurt by budget constraints and less help from the FBI, which used to conduct investigations for the department, but after 9/11 focuses on antiterrorism. The Justice Department has kept track of white-collar cases only since the early 1990s.
  24. Judges all over the country made generous interpretations of the law, broadening corporate and executive rights and privileges, narrowing white-collar criminal statutes, and repeatedly overturning federal prosecutors in notable white-collar cases. Over the last decadethe courts have repeatedly decided in favor of corporate top executives over the government.
  25. Large and powerful corporations, under the advice of their expensive defense lawyers, were eager to appear cooperative and wrap up investigations quickly, before prosecutors uncovered more damning information.
  26. The culture of the Justice Department changed. They came to view the highly successful Enron prosecutors as reckless and abusive, when in fact it requires being sufficiently aggressive to flip each rung in the corporate hierarchy. This was once a basic tool of prosecutors that are now rarely used, in favor of speedy fines.
  27. Big Law corporatized white-collar criminal defense, working more often in symbiosis with prosecutors than as adversaries. These lawyers, not the government, conducted extensive and lucrative investigations, delivering their findings to the government and moving on to the next.
  28. In the four years from 1992 through 1995, white-collar cases averaged 19% of overall cases. In the four years from 2012 to 2015, that number had fallen to just under 9.9%. And the Department of Justice wasn’t just going after fewer cases, but easier cases. In 2016 the Department of Justice brought the lowest number of white-collar cases against individuals in twenty years, on track for just 6,200 cases, down more than 40% from 1996—despite population and economic growth.
  29. I have a friend who was a white collar defense attorney. He told me their clients had enormous amounts of money, and could hire the best lawyers. They usually weren’t even paying the fees out of their own pocket – the company covered their legal expenses. His defense firm was one of the best in the Bay Area, and easily beat the prosecution, over and over again.  The money also paid for mock trials where fake juries were paid to vote on which arguments worked the best

Alice Friedemann   www.energyskeptic.com  author of “When Trucks Stop Running: Energy and the Future of Transportation”, 2015, Springer and “Crunch! Whole Grain Artisan Chips and Crackers”. Podcasts: Derrick Jensen, Practical Prepping, KunstlerCast 253, KunstlerCast278, Peak Prosperity , XX2 report ]

Jesse Eisinger. 2017. The Chickenshit club: Why the justice department fails to prosecute executives. Simon & Schuster. 400 pages

The Department of Justice is a loose federation of 94 offices around the country, each a realm unto itself, run by a US attorney who is almost untouchable by headquarters in faraway Washington, DC. Of all those offices, the Southern District of New York, located at the bottom tip of Manhattan, has the smartest and ablest prosecutors in the land. Any alum of the office will be happy to verify that.

The Department of Justice does not merely struggle to prosecute top bankers. The problems go beyond the financial crisis and beyond the financial sector.

Walmart found through its own internal investigation at least $24 million in suspicious payments. The lead agent on the probe determined that American and Mexican laws had probably been broken. Then, the report went on to demonstrate, Walmart’s leaders, including then CEO H. Lee Scott Jr., kiboshed the investigation. Barstow won a Pulitzer for the stories the following spring.

After the New York Times approached Walmart but before the story came out, the company reported itself to the Department of Justice for possible violations of the FCPA. The retail giant had known about the bribery allegations but had shown little inclination to reveal itself to the government until the Times forced the matter. The Feds initiated an investigation. The Walmart investigation generated a cornucopia for law firms. The retailer spent upward of $700 million on legal advice and compliance improvements. All that money was well spent. The Justice Department’s probe proceeded slowly. The government was frequently stymied. Many of the allegations involving Mexico were old. The statute of limitations had run out. The Mexican government barely cooperated, ignoring the Department of Justice’s official requests for assistance for years. Walmart seemed to have had troubled operations in other countries as well. Justice Department officials investigated its activities in India, China, and Brazil. The department tried to put resources into the case. There were two prosecutors from the Eastern District of Virginia and three from Main Justice. But early on, prosecutors couldn’t get the FBI or the IRS engaged. The agencies did not prioritize the case.

After two years, Walmart eased out at least eight executives who had been involved in the suspicious activities or had been alerted to them. Their retirement packages, however, remained intact. The Department of Justice probe lasted years but slowed dramatically by 2015. In October of that year, the Wall Street Journal reported that the federal investigation found no serious violations. That Walmart made its changes and avoided any charges or even a deferred prosecution settlement suggested that the gentle farewells had been carried out with at least the tacit approval of the government. One of the biggest corporate scandals in years faded away to nothing.

After two years, Walmart eased out at least eight executives who had been involved in the suspicious activities or had been alerted to them. Their retirement packages, however, remained intact. The Department of Justice probe lasted years but slowed dramatically by 2015. In October of that year, the Wall Street Journal reported that the federal investigation found no serious violations. That Walmart made its changes and avoided any charges or even a deferred prosecution settlement suggested that the gentle farewells had been carried out with at least the tacit approval of the government. One of the biggest corporate scandals in years faded away to nothing.

Similar problems plagued the corporate investigations into Toyota (for the unintended acceleration problems with its cars) and General Motors (faulty ignition switches). Toyota did not cooperate fully with the Southern District’s investigation. As for GM, the Department of Justice could not identify any executives who had the full picture of the carmaker’s problems and responsibility for fixing them.

Even dedicating resources does not bring success. After the Deepwater Horizon platform exploded in 2010, killing 11 people and causing the largest oil spill off the US coast in history, Lanny Breuer gathered together a task force to investigate. BP paid $4 billion in criminal penalties and pled guilty. But by early 2016, the task force had come up almost entirely empty against individuals. It had started by charging low- and midlevel executives with a variety of crimes, but began withdrawing charges and dropping executives from its cases as courts ruled against it. The government ended up withdrawing manslaughter charges against two midlevel supervisors. Some of the cases were dismissed. Finally, the Justice Department lost three trials against executives.

Even supposed triumphs against corporate executives often underwhelm. In late 2015, the Justice Department brought coal baron Don Blankenship, CEO of Massey Energy Company and a power in West Virginia, to trial for his role in creating unsafe conditions at the Upper Big Branch mine, the site of a terrible explosion that killed twenty-nine miners in 2010.

The jury found Blankenship guilty, the first conviction of a top executive for a workplace safety violation. But the success was tempered. Massey was not in the Fortune 500 and presented an easier target than, say, a Goldman Sachs or JPMorgan executive. More troublingly, the jury found Blankenship guilty only on one count of conspiracy, a misdemeanor for breaking federal safety rules, and exonerated him on two other felony counts. Even with a local jury made up of people supposedly sympathetic to dead miners, such cases don’t go smoothly. The judge sentenced Blankenship to one year in prison, the maximum allowed by law. People hailed the result, relieved that at least yet another CEO wasn’t getting off. But for a man who had been so cavalier about jeopardizing the lives of his employees, one year seems paltry.

Defenders of the Department of Justice maintain that these failed corporate investigations did not indicate a lack of will or skill. They highlighted the inherent difficulties with prosecuting corporate crime. Corporate responsibility is diffused; the top leadership of giant corporations make few day-to-day decisions and none without the advice of lawyers and accountants. They say that prosecutors didn’t make cases because there were not cases to make. But then the Department of Justice started changing its corporate investigative practices and policies. In making these shifts, the department tacitly admitted that its past actions were indeed wanting. The age of deferred prosecution agreements gave way to what we have today: prosecutors and the SEC, responding to criticism from Judge Jed Rakoff, academics, the media, lawmakers, and activists, made companies admit wrongdoing and plead guilty.

The government now assigns corporate monitors to oversee its settlements more frequently. By early 2016, the 2008 crisis had resulted in nearly $190 billion in fines and settlements from 49 separate financial institutions. These new arrangements are no more satisfying than the previous period’s. The fines continued to hit the shareholders, not the wrongdoing executives. Prosecutors almost never named any individuals. Portions of the penalties often were tax deductible (since they were partially disgorging profits). All the big banks lined up to make mea culpas over mortgage securities misdeeds. For mortgage securities abuses, JPMorgan paid $13 billion, Bank of America paid $8.5 billion, and others paid giant sums. The big banks paid up for foreclosure abuses; for manipulating interest rates and foreign exchange rates; for trading with sanctioned countries; for money-laundering-monitoring failures; and for conflicts of interest in their research activities.

But many of these settlements became less impressive once the particulars came out. The banks could earn credit for building affordable housing or helping mortgage holders, earning bonus dollars for each dollar actually spent. Perhaps worst of all, the department’s statements of fact that went along with these settlements were terse documents that contained little detail about who did what to whom and when. The banks wrote checks and in exchange won the ability to shield their executives from punishment and the specifics of their activities from the public eye.

Prosecutors took extreme measures to minimize the regulatory consequences for a guilty plea. Regulators did not pull licenses. They did not ban them from government programs. The guilty pleas had only symbolic value. They lacked force just as much as the old settlements did.

The Yates memo was seen for what it was: an implicit critique of the previous Holder administration and a tacit admission that it had not done enough to prosecute top executives. Yates created new policy: the department had to go after individuals again. The key element of a corporation’s cooperation, the memo stated, was to identify individuals who had done something wrong. Without naming the people responsible, a company could not get credit for cooperation and softer penalties. Some critics welcomed the new policy but with caution. What individuals would corporations be required to finger? How would the Justice Department prevent a company from scapegoating some low-level schnook? In the SEC case on Abacus, the agency had been satisfied to go after Fabrice Tourre and no one else. Time and again, the government went after only one low-level employee, a “lone gunman theory” of corporate crime. Would the Yates memo change this practice? Would the department’s investigations go high enough, to the boardroom and the top corporate offices? Would prosecutors still be overly reliant on Big Law’s internal investigations of its clients?

The department even undermined these minor improvements. At the same time that it issued the Yates memo, Main Justice also set up a compliance office to vet corporate cooperation. The ostensible aim was to determine whether companies were cooperating or not and whether they were receiving due credit. The effect would be to add to the bureaucracy. The move added yet another layer of evaluation for investigations, making it harder to bring cases against either corporations or high-level individuals.

The Yates memo suggested that the Justice Department’s policy had changed, but had it altered the way the department conducted business? The answer soon appeared to be no. In the first year of the Yates memo, the DOJ scored few obvious successes. When it brought a civil action against Goldman Sachs in 2016 for mortgage-related wrongdoing in the lead-up to the financial crisis, the Department of Justice named no individuals. The government charged individual executives from Volkswagen for having faked its emissions tests, but it did not appear likely to charge top officials at the German carmaker.

BACKLASH.  A broad coalition of corporate interests had led a fight against prosecutorial power in the post-Enron period. After Enron, Arthur Andersen, WorldCom, Adelphia, and Tyco, corporations, their lobbyists, and the white-collar defense bar revolted. They forced the Department of Justice to roll back the Thompson memo, depriving the government of tools and techniques to push corporate investigations. Over the decade, these interests changed the way the government enforces the corporate criminal code.

Now the same forces gathered again to fight the Obama administration’s initiatives. Modest as the corporate guilty pleas and the Yates memo were, the corporate lobby recognized a new danger: the government understood how inadequate its corporate investigations were. And so, in response to the reforms of the post-financial-crisis era, the same interests tried to roll out the same campaign from more than a decade earlier. Why shouldn’t the defense bar go back to the exact same playbook it had employed then? It had worked.

Former members of the Obama administration, now working for corporations, attacked the Yates memo.

Some reformers hoped to expand prosecutorial power when it came to white-collar crime. They discussed extending statutes of limitations and expanding the criminal code. In health and public safety, prosecutors can charge responsible corporate officers criminally (with a misdemeanor). It does not matter if they were not aware of the problems. Some argued to expand that into other sectors, such as finance. Bank failures could cause job losses and economic devastation. Perhaps bankers who drove their institutions to disaster merited such punishment. None of these proposals made progress.

With Donald Trump in office, corporations have an even friendlier Washington despite his populist rhetoric and pitch as the champion of the working class. He fired Sally Yates, the architect of the DOJ’s attempt to improve its prosecution of corporate crime.

His appointees came from corporate boardrooms and Wall Street, especially Goldman Sachs. Meanwhile, Republicans moved to gut regulations, especially those reining in the banks, seeking to eviscerate the Consumer Financial Protection Bureau and roll back Dodd-Frank.

Jefferson “Jeff” Sessions III took over the DOJ, promising to pull back on its aggressive civil rights enforcement and go after voter “fraud,” a Republican obsession and vehicle for voter suppression. The incoming SEC chairman, the Sullivan & Cromwell partner Walter J. “Jay” Clayton, boasted Goldman Sachs as a loyal client and had few public views on securities enforcement, except that the government had gone too far in pushing the FCPA anti-bribery law, passed in the wake of Stanley Sporkin’s enforcement push in the 1970s. Any hope for tougher corporate enforcement appears laughably misplaced.

Breuer and his supporters believed he had overseen a significant upgrade in talent, recruiting a class of attorney that Main Justice hadn’t been able to secure in the past. He had commanded the first guilty pleas from banks in decades, overseen investigations into currency and interest rate fixing, guided major public corruption cases, and set up the BP Task Force in the wake of the Deepwater Horizon disaster, which supporters praised for having won a guilty plea and large fine from the company itself. He received little credit for any of those measures, however. In a maddening turn of events for him and his loyalists, Breuer left the Justice Department having become the face of the department’s inability to bring cases against Wall Street. That was unfair. The problem was much greater than one man.

In September 2013 James Comey, who had talked so bravely about not being chickenshits at the beginning of the century, took a job as Obama’s FBI head. His interventions during the 2016 presidential campaign soiled his hard-won reputation, perhaps permanently. In July of that year, he gave an unusual press conference chastising Hillary Clinton for her handling of her email scandal, while explaining why he wasn’t recommending criminal charges in the matter. Prosecutors were appalled, viewing it as a grandstanding spectacle. Good prosecutors do not explain their declinations publicly. To smear the subject of an investigation while passing on charges is regarded as unethical.

Then Comey reopened the Clinton email investigation 11 days before the election, after the FBI had found new emails—which were not even on her computer, but disgraced former Congressman Anthony Weiner’s, who was married to Huma Abedin, a Clinton aide. Comey alerted Congress before agents had reviewed the emails, violating long-standing FBI and Justice Department policy not to go public about investigations right before elections. The FBI closed the matter soon after as the email trove contained nothing new. But the damage to the Clinton campaign was done.

Bad judgment, acts of prosecutorial abuse, fears of losing—all could be seen as products of the eroded investigative skills. A senior official goes rogue, as Comey did, because he doesn’t have enough faith in the customs of his institution. Abuses happen when a prosecutor doesn’t have a strong enough case but goes forward anyway. Senior officials take a pass on indictments because they are too inexperienced to judge the evidence. As the abilities of the FBI, SEC, and Justice Department corrode, they make blunders. The blunders make them more reluctant to pursue riskier paths such as prosecutions of powerful and well-defended individual corporate executives, which leads to more mistakes. Those who fought hard against the large corporations incurred costs, not rewards. They often left with diminished status and did not alight on such prominent perches as Breuer’s. The people who broke with the prevailing culture, such as Paul Pelletier and James Kidney, were pains in the ass and made life difficult for their bosses. Often the people who do so—the whistle-blowers at companies and the prosecutors who take on the powerful—share a character flaw: they don’t play exactly by the unwritten rules, they lack diplomatic skills, and they don’t understand how to preserve their viability, either within the bureaucracy or for their next job. Their righteousness offends others. Most people act in their own self-interest. They do not. A reputation for toughness was not its own reward.

Justin Weddle, who had suffered public criticism from a judge in the KPMG case, struggled to find work in private practice. Stanley Okula, also a key prosecutor in the KPMG case, stayed at the Southern District—a lifer whom defense attorneys felt free to criticize because he had been assailed by judges. Shirah Neiman, the long-serving and unrelenting government lawyer, was pushed out of the Southern District of New York.

Corporate whistle-blowers had it even worse. Their lives were never the same. They faced divorce, financial ruin, and joblessness. They wondered whether it had been worth it. They wondered why they had been disbelieved so often by government investigators—when they had been interviewed at all.

Those who took on the large financial institutions from other government roles also suffered. Sheila Bair, who had headed up the FDIC and challenged the Obama administration over its bank bailouts, could not land a prominent corporate or administration position.

Ben Lawsky, the former Southern District prosecutor who had risen to become the head New York State financial regulator and had miffed his fellow regulators and the banks with his aggression, did not take a job at a top law firm. One chairman of a major New York firm said the New York bar had blackballed him.

Judge Jed Rakoff had a tough time as well. His rulings faced legal setbacks. In 2016 a panel of the Second Circuit Appeals Court threw out a verdict in a civil fraud trial that Rakoff had presided over. The Southern District had brought charges against Countrywide Home Loans, the mortgage bank, for deceptive mortgages it had sold to mortgage giants Fannie Mae and Freddie Mac. The government had also brought charges against one midlevel executive. The jury found the company, now owned by Bank of America, and the executive liable. In reversing the jury, the appellate panel criticized Rakoff’s jury instructions. It determined that the judge had erred in his definition of fraud. The panel wrote that since Countrywide had not intended to commit fraud at the time the contracts with Fannie and Freddie were written, the government had not met the standard of proof. Countrywide had intentionally breached its contracts, but that did not constitute fraud.17 Prosecutors at the Southern District and Rakoff found the decision ridiculous. The Southern District petitioned the panel to review it, a request the higher court rejected.

The Southern District’s founding, in 1789, predates that of the Department of Justice itself. The office held its first criminal trial in 1790, which lasted a day. The first US attorney convicted two men of conspiring to destroy a brigantine and murder its captain and a passenger. The second US attorney simultaneously served as mayor of New York City. Today the office specializes in the most complex and difficult criminal cases: corporate white-collar fraud, often securities law violations. Insiders relish its nickname: the “sovereign” district, for its penchant for claiming jurisdiction over any such case from any corner of the United States, the other 93offices be damned.

But it takes something even more to get to the Southern District; something more personal. Someone somewhere—a top partner at a law firm, a respected judge or professor—had to send the signal. That sign indicated the candidate wasn’t just special; he or she was a superstar in the making. The Manhattan US Attorney’s Office launched the careers of judges and legal giants of every kind; politicians (New York City mayor Rudolph Giuliani and Representative Charles Rangel); cabinet secretaries (Henry Stimson, the US secretary of war under presidents William Howard Taft, Franklin Delano Roosevelt, and Harry Truman); a US attorney general (Michael Mukasey); FBI directors (Louis Freeh); and two Supreme Court justices (Felix Frankfurter and John M. Harlan II).

America’s economic history has unfolded in a series of booms followed by busts followed, crucially, by crackdowns. After the stock market crash of 1929, congressional hearings channeled public outrage and resulted in landmark laws regulating Wall Street and creating the Securities and Exchange Commission in 1934. A few years later, the new SEC helped put the head of the mighty New York Stock Exchange (NYSE) in prison. Though inconsistent, the SEC over the intervening decades emerged as one of the most respected government regulatory bodies. The SEC is the country’s most important corporate regulator, overseeing publicly traded companies and the nation’s capital markets.

After the savings and loan scandals of the 1980s, when hundreds of small banks across the country failed due to reckless real estate loans, the Department of Justice prosecuted over 1,000 people, including top executives at many of the largest failed banks.

After the Michael Milken–run junk bond boom and blow-up of the late 1980s, prosecutors spent years digging up evidence of stock manipulation and insider trading at major investment banks and law firms, prosecuting some of the most powerful Wall Street figures of the era.

In the early 2000s, the burst Nasdaq bubble revealed a corporate book-cooking pandemic. Top officers from giants such as Enron, WorldCom, Qwest Communications, Adelphia, and Tyco International ended up in prison.

By contrast, after the 2008 financial crisis, the government failed. In response to the worst calamity to hit capital markets and the global economy since the Great Depression, the government did not charge any top bankers. The public was furious. The bank bailouts and lack of consequences for bankers radicalized both ends of the political spectrum and gave rise to two of the most potent social movements of our time: the Tea Party and Occupy Wall Street. Anger about the lack of Wall Street accountability seeded disenchantment with Obama.

According to a Wall Street Journal analysis of 156 criminal and civil cases brought by the Justice Department, the Securities and Exchange Commission, and the Commodity Futures Trading Commission against 10 of the largest Wall Street banks since 2009, in 81% of the cases, the government neither charged nor even identified individual employees. In the remainder, the government only charged 47 low and midlevel employees with just one boardroom-level executive, whom the SEC charged civilly.

In his own incoherent and superficial way, Donald Trump rode anger about Wall Street throughout his campaign, railing at bank power. He closed his campaign by hinting poisonously about a cabal of global bankers rigging the system. He assailed politicians who were “owned” by Goldman Sachs: first Ted Cruz in the primary and then Hillary Clinton in the general. The Republican platform called for breaking up the big banks by returning to the Glass-Steagall Act, the Depression-era law that split commercial banking from investment banking, a reflection of resentment about the government bailout of the financial system as bankers wriggled free. No sooner had Trump taken office then he rushed to stuff members of that cabal into his White House and cabinet. He and the Goldman alumni who advised him moved within days of taking office to unravel Dodd-Frank and loosen restrictions on corporations generally.

Today’s Department of Justice has lost the will and indeed the ability to go after the highest-ranking corporate wrongdoers. The problem did not begin in the aftermath of the 2008 crash—and it has not ended. Prosecutors don’t simply struggle to put executives for “Too Big to Fail” banks in prison. They also cannot hold accountable wrongdoing executives from a gamut of large corporations: from pharmaceuticals, to technology, to large industrial operations, to retail giants.

A little-understood shift in how the government prosecutes white-collar corporate crime has happened. After the post-Nasdaq-bubble prosecutions of the early 2000s, the Justice Department began to suffer fiascos, losses in court, damning acts of prosecutorial abuse, and years of intense lobbying and pressure from corporations and the defense bar to ease up. Prosecutors lost potent investigative tools and softened their practices, changes that have made it harder to gather evidence and conduct even the most basic investigations.

Compounding this issue, the Justice Department has been hurt by budget constraints. The FBI, which usually conducts investigations for the department, shifted resources to anti-terrorism efforts in the wake of 9/11. The Justice Department has kept track of white-collar cases only since the early 1990s. In the four years from 1992 through 1995, white-collar cases averaged 19 percent of overall cases. In the four years from 2012 to 2015, that number had fallen to just under 9.9 percent. The Department of Justice wasn’t just going after fewer cases, but easier cases.

Judges all over the country embarked on newly generous interpretations of the law, broadening corporate and executive rights and privileges, narrowing white-collar criminal statutes, and repeatedly overturning federal prosecutors in notable white-collar cases. The Supreme Court has expanded the rights of corporations in the most potent, visible fashion, but lower courts have contributed to the trend. Over the last decade, while draconian when it came to street criminals, the courts have repeatedly read the US Constitution expansively when the government tried to charge corporations or their top executives.

To compensate for these changes, the Department of Justice shifted from targeting individual corporate executives with trial and imprisonment. Instead, prosecutors switched to a regime of almost exclusively settling with corporations for money.

Since 2001, more than 250 federal prosecutions have involved large corporations. These include some of the biggest names in corporate America: AIG, Google, JPMorgan Chase, and Pfizer among them. The majority of these have been negotiated deals, not indictments. From 2002 through the fall of 2016, the Justice Department entered into 419 such settlements, called deferred prosecutions and non-prosecution agreements, with corporations.

Meanwhile, corporate prosecutions fell. The Justice Department prosecuted 237 companies in 2014, 29% below the number in 2004.These prosecutions tended to be of tiny, inconsequential companies.

Large and powerful corporations, under the advice of their expensive defense lawyers, were eager to appear cooperative and wrap up investigations quickly, before prosecutors uncovered more damning information. They could pay settlements with other people’s money: that of their shareholders.

Big Law corporatized white-collar criminal defense, working more often in symbiosis with prosecutors than as adversaries. These lawyers, not the government, conducted extensive and lucrative investigations, delivering their findings to the government and moving on to the next.

Prosecutors, for their part, could generate headlines with eye-popping dollar amounts and set themselves up for lucrative careers in the private sector. And they hadn’t had to go to court to prove their case. The bigger the penalties, the more headlines they grabbed, and the more appealing they became to the prosecutors who could name their price.

These settlements did little to deter corporations from breaking the law. “Over 50% of the most serious fraud and larceny culprits were recidivists, “about the same as robbery and firearms offenders and far higher than drug traffickers.

Corporate settlements were easier to reach than indictments of individuals, particularly top executives.

In 2016 the Department of Justice brought the lowest number of white-collar cases against individuals in twenty years, on track for just 6,200 cases, down more than 40% from 1996—despite population and economic growth.

Investigations and prosecutions of people are much more difficult than going after corporations. Prosecutors began to see probes of single human beings, one by one by one, as a slog; nasty trench warfare that carries a risk of humiliation if they lose. Investigations of individuals consume more time. Investigators must work slowly, first going after lower-level employees and then flipping them against their bosses. To their bosses at the Department of Justice, prosecutors who pursue individuals appear less productive. Investigating top executives at large corporations is more difficult because they insulate themselves from day-to-day decision making. Prosecutors find it harder to accumulate the evidence necessary to prove their cases beyond a reasonable doubt. And individuals have greater incentive to fight prosecutors.

Defaulting to a settlement with a corporation without prosecuting individuals corrodes the rule of law.

Companies argue that the government has extorted them into forking over money for unproven crimes.

The public, meanwhile, sees corporations writing checks to make charges disappear.

Settlements have another downside: they weaken prosecutorial skills. Over time, prosecutorial aversion turns into lost knowledge. Settlement culture breeds investigative laziness and erodes trial skills.

Businesses now have privileges not seen since the Gilded Age. Executives make more money than ever. Corporate profits are at record highs. The courts are expanding corporate rights, as companies exert great political power and dominate our policy discourse. But the most valuable perquisite corporate officers possess is the ability to commit crimes with impunity. Such injustice threatens American democracy.

Today the justice system is broken.

The Justice Department succumbed to pressures, avoided the biggest cases. It became fearful of losing and lost sight of its fundamental mission to make this country a just place.

The lack of technology made the DOJ far less effective and productive. The DOJ was woefully behind private industry. In 2003, the DOJ had old computers, no blackberries, no document management system, and no way even to email the FBI agents assigned to the investigation. With this pathetic setup, they were taking on the infernally complex company Enron in the most important corporate fraud case in memory, against a legion of defense lawyers from the best firms in the world.

Speculation dominated the company’s culture and contributed an outsized portion of its profits. Once, after a trader had lost close to a half billion in one day, Skilling came down to the trading floor and exhorted the traders to “man up.” Get back out there and make more trades. Win it back.

Instead of having Enron disclose trading profits, Delainey and his executives hid them. They stashed the millions of dollars of earnings, in what prosecutors figured out was actually a “cookie jar,” that set aside profits for a possible legal settlement, was a lie. Poring over the company’s intentionally complicated and messy financial statements one more time, they’d noticed that a year after creating the reserve, Enron had lost millions in another division and dipped into that money—reserved for legal costs—to cover the losses and make it look like it had made money that quarter. That accounting hocus-pocus was illegal.

Enron executive Delainey could explain that little scam, but that’s not why they needed to flip him. Complex white-collar investigations required finding “rabbis” to guide you through the transactions.

They were conducting an old-fashioned investigation. They needed someone on the inside. If they could flip Delainey, they could take the prosecution all the way to the top. They could begin to build a case that Jeff Skilling had lied to investors and the public.

Most white-collar criminals are “individuals who find themselves involved in schemes that are initially small in scale, but over which they quickly lose control.

Few corporate white-collar fraudsters—not egregious Ponzi schemers or boiler room operators but perpetrators at large, respectable companies—start out thinking they will commit a crime.

They tell themselves, “I’ll just do it this quarter so we don’t miss the number, and then I’ll stop it and undo what I’ve done.” They don’t think of themselves as crooks. It’s just a short-term fix. Then they use the device again and again until they have no choice but to keep up the charade. They start rationalizing what they’re doing. It may be aggressive, but it’s not wrong. It’s not theft. The bad guys aren’t lying just to prosecutors. They are lying to their shareholders, their colleagues, and their families.

The prosecutor’s job is to crack through that self-justification and self-delusion.

When Enron filed for bankruptcy in December 2001, the implosion devastated a major US city, Houston, both economically and psychologically.

Ken Lay, Enron’s founder, was a longtime Bush family friend and major Republican donor.

Over the next few years, new companies reported accounting problems with alarming regularity: Tyco, Adelphia, HealthSouth, WorldCom.

Enron’s significance would recede, however, and the lessons it holds for white-collar enforcement would be forgotten. Despite Enron’s political might, the US government aggressively investigated the fraud at the energy trading company and prosecuted dozens of individuals, including the top officers of the company. Lay, Skilling, and Andrew Fastow, the chief financial officer, were all found guilty. Skilling and Fastow went to prison; Lay would have gone, too, but he died of a massive heart attack in 2006,

In all, the government charged thirty-two people associated with the Enron frauds, including Wall Street bankers who’d facilitated the deceptions.

The crimes were so egregious that the prosecutions were thought to have been easy. But that’s not at all true. What persecutors on the Enron Task Force did was not simple and never inevitable. If the task force hadn’t had resources, time, intelligence, and patience, Lay and Skilling may not have been prosecuted at all or could have easily been acquitted. Lay and others were hard to prosecute because they never or rarely used.  So the government lacked direct, incriminatory evidence of their guilt.

Despite their success, the Justice Department took the wrong lesson from Enron. The defense bar and Justice Department officials came to view the Enron prosecutors as reckless and abusive rather than sufficiently aggressive to meet the prosecutorial challenge. Today it’s an open question whether the Justice Department would be capable of taking on Enron the same way the task force did.

White-collar cases could languish for years, a poor way of conducting any investigation. The evidence trail grows cold, memories fade, and defense lawyers have time to formulate their client’s stories and tactics. Prosecutors needed to maintain momentum. Thompson and Chertoff understood that with the Enron debacle, the public would be bothered with slow justice. That there might be no justice—no prosecutions at all—never even occurred to anyone.

The Enron defense would point out that lawyers and accountants blessed the company’s actions. Indeed, that was true. Prosecutors needed to move cautiously. They had to sift through the complexities to find the potential crimes. However, the public and the press did not understand or sympathize. The press assailed the government for moving too slowly and letting the perpetrators walk.

 

 

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