Government, energy & environment

Network politics

Could social networks be used by governments to create better societal norms? Some people think they can, which is why phrases like ‘network science’ and ‘network policy’ keep cropping up in government policy documents nowadays. The theory is a good one. If you can create the right kind of social group, ideas tend to move between members and the pattern of individual ties will, to a greater or lesser extent, dictate how people behave. The idea has been shown to work – up to a point – in business and scientific invention so why can’t it be applied to other areas where the aim is to change attitudes and behaviour (eg, health, education or even climate change). For example, a few years ago an American sociologist called Brian Uzzi was puzzled why some musicals on Broadway were hits while others were flops. An analysis of 321 musicals launched between 1945 and 1989 had a startling conclusion. If teams of writers, directors, producers and choreographers had never worked together their resultant productions tended to flop. But so did teams that knew each other extraordinarily well. But teams that were balanced (ie, the teams that blended strong and weak ties) seemed to produce all the hits. Uzzi’s explanation was that you need experience but you also need fresh ideas from outside.

So how is this relevant to government policy? The answer is that a ‘perfect network’ approach could be used to run schools, manage hospitals or cut teenage binge drinking. All you need to do is create the right group and influence the individuals that are the most influential within the group. Great. But will it work in practice? I think not. The main argument against this approach is the same as the argument against Malcolm Gladwell’s book, The Tipping Point (look it up). The other argument is that this all presupposes some level of coherent community. But while governments seem to be consolidating, society appears to be fragmenting. Yes, we are all connected online nowadays, but in the physical world we’re not. A study by the Young Foundation in the UK, for instance, recently found that around half a million pensioners spend Christmas alone and noted that there are probably around two million people in the UK with nobody to talk to. A similar study in the US found that as many as ten million Americans have no real friends. Yes, network infused ideas like this could work in theory but in reality the ties and influence are illusory.

The rise of big government

I’m often asked whether government will get bigger or smaller in the future. I’d like to think smaller but to my mind the trends currently suggest the opposite. The recent global financial crisis (GFC) is one reason. Governments had to step in to bail out private sector companies and they now found themselves owning a number of large financial institutions. Another factor is demographics. Nations are ageing and older people will require more public heath and associated services. Another issue is regulation. State intervention in energy, security and heath and safety is on the rise. Globalisation is yet another factor. You might think that globalisation would remove power from national governments but this hasn’t been the case. Greater job insecurity, market failures and issues that need national responses (climate change etc) all favour government involvement. Indeed, if one looks at the largest companies and investors in the world, many of them are now state-run. Moreover, China has proven – so far at least – that state capitalism can work and it may well be an autocratic capitalist model that replaces democratic free markets in many parts of the world. An example of the increasing power of the state is in Britain. In 2000, the state was responsible for around 37% of national GDP. By 2008 this figure had grown to 48% and is now hovering around 52%. In other words, the British government is directly responsible for over half of the British economy. To some extent this is not a problem. It is not so much what a government spends but how they spend. Nevertheless, a battle of ideas about the role of the state is about to begin.

Britain faces a new dark age

According to The International Energy Agency, the Liquefied Natural Gas (LNG) market faces a perfect storm in or around the year 2015 due to a combination of falling domestic gas production, economic recovery and a general tightness in the market. The British government thinks that renewable energy will take up any slack but in my opinion they are dreaming. The problem is a particularly British one. A decade or two ago the UK was self-sufficient in natural gas, thanks to the North Sea fields. Now it’s a net importer and gas heats more than 40% of British homes. In fact the UK is the world’s fifth largest consumer of natural gas after the US, Canada, Russia and Iran. As a result, the UK National Grid expects that 75% of UK gas needs will have to be imported by 2015 and this clearly makes Britain vulnerable to cuts or disruptions in supply. In theory, none of this should be a problem. Countries like France and Germany have long-term contracts with gas suppliers and Britain could do the same. However, Britain prefers to buy on the open market. Having large amounts of gas in storage would also help, but even here Britain is vulnerable. 75% of Britain’s gas storage is held in just one depot in Yorkshire. Thus even the smallest stress on the system could result in catastrophic consequences. What’s the lesson here? The first lesson is that when it comes to energy security you cannot rely on free markets. Secondly, if we are entering a period of much higher demand, carbon reduction and cutthroat competition, then the current system makes no sense.

New climate of opinion about oil

Some doom merchants would have us all believe that oil is about to run out. They quote frightening statistics such as the one from the International Energy Agency (IEA) that we use 85 million barrels of oil every single day – forecast to be 105 million barrels per day by 2030. Or predictions from the IEA that ‘the output of conventional oil will peak in 2020 if oil demand grows on a business-as-usual basis’. But, as always, there are two sides to every story.

The oil is indeed running out but how much is left depends on its price. Some people forecast that peak oil would occur around 2030, others say earlier. However, it all depends on what you mean by ‘oil’ (note the word ‘conventional’ contained within the IEA forecast). My own view is that we are indeed getting very close to peak ‘easy to find’ or peak conventional oil. Demand will almost certainly increase substantially in the years ahead (largely due to rising Asian demand) and there will be an increasingly urgent debate about what will happen next. For example, can the world’s transport and manufacturing system be run using biofuels, hydrogen or energy efficiency machines? The answer is that we don’t know although energy efficiency alone could make a substantial difference. I think it is also fair to say that while renewable sources may make a substantial difference eventually, this is highly unlikely in the foreseeable future. So what’s the solution?

The best solution is non-conventional oil. According to the IEA, if you add the amount of non-conventional oil (eg, tar sands, shale oils etc) to conventional supplies the remaining reserves amount to some 9 trillion barrels. That’s nine times the amount the whole of humanity has consumed so far, which is a lot of oil. Canada, for instance, has shale oil reserves second only in size to Saudi Arabia’s crude oil reserves. Of course there are problems. Non-conventional oil is difficult to get at – that’s why it’s still there. It consumes large amounts of energy, water and money to get out of the ground. But the rising price of oil might actually help. According to an energy research firm, Cambridge Energy Associates, higher oil prices will lead to more discoveries both of conventional and non-conventional oil. Thus, a likely scenario is rising but stable prices and a demand curve that undulates along a plateau rather than reaching a steep peak. Moreover, the higher the oil price goes the more incentive there will be to use it wisely and to invent alternatives.

Cyberwar trends and other future threats

I’m becoming obsessed with military scenarios. Why? Partly because they touch on world-changing shifts and partly because they push my thinking to the very edges of what’s possible. For example, I’ve been reading a strategy document called the Future Character of Conflict, published by the Development, Concepts and Doctrine Centre (DCDC), which is part of the UK Ministry of Defence. It’s a great read. Outtakes include the idea that the UK faces a threat from a ‘toxic cocktail’ of state-sponsored terrorists, extremist groups and criminal gangs in the years ahead. The growth of communications technologies (especially social network sites) and porous borders also means that non-state actors will be harder to detect and control. I think this is all true but we should not forget about conventional threats. China is a slight worry although historically speaking the nation has never been wildly confrontational outside its own borders. However, warnings have been circulating among NATO members and the EU recently warning about cyber attacks. People assume that cyber war is something still only found in sci-fi novels but this isn’t the case. In 2007, the Director-General of MI5, Jonathan Evans, warned that several nations were already involved in such attacks although he diplomatically neglected to mention which ones.

More recent warnings have named some names and China is at the top of the list, although China denies any such moves. What are the cyber spies and cyber soldiers after? According to sources at the Office for Cyber Security (part of the UK Cabinet Office), there are two types of cyber spying or cyber attack. The first are ‘fishing trips’ which involve floating around the internet looking for interesting or sensitive information (Classified ‘CX’ reports issued by MI6 for instance). The other type of activity is disruption, aimed primarily at computer systems. This might not sound very dangerous but remember that everything from aircraft control systems to energy networks and communications are now generally run by computers. As Harry Eyres said in the Financial Times recently (quoting someone else): ‘We are much more vulnerable now than we were during the Second World War. When I grew up we had the skills to be self-sufficient; we made our own clothes and fished, we never felt poor. Now you don’t need a nuclear bomb to finish off a country; you just cut the power off for a week.’

Quite right. Think about the consequences of no power for a week. ATMs wouldn’t work so you couldn’t get any cash. No money equals no purchases. You couldn’t re-charge a phone; use email or the internet (so no digital cash) and your credit cards wouldn’t work either (electronic). The fridge would go off and so too would the freezer so no fresh food. Doors and lifts in shops and offices wouldn’t work (largely electric). Hospitals would eventually grind to a halt. So would trains. The TV would be off, electric cars would be stationary, traffic lights would go out and so too would most heating systems. Add to this list kettles, ovens, CCTV, e-books, digital files, domestic lighting, alarms, GPS, RFID. It’s almost endless, endless chaos.

To read the DCDC report look under scenario reports on this link...
http://www.nowandnext.com/?action=misc&subaction=books