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After all the trouble and difficulties the years 2007, 2008 and 2009 brought along, which could not be solved during 2010, many people are hoping that 2011 will be the year when the economy will find its way back to solid growth to shrink unemployment back to its natural rate and to end the frustration and self-doubt that came with the crisis.

Despite the discouraging developments in Washington D.C. and the burden of high unemployment, it seems that 2011 could indeed be a year of stabilization. There is potential for strong growth, once U.S. companies, which are sitting on around $2 trillion in cash waiting to be invested (http://www.npr.org/2010/12/10/131955624/Business-News), see demand for their widgets grow and utilization rates of their facilities go up. However, it will take more than just a modest recovery to prompt companies to start spending.

On October 15th, 2010, I listened to Nobel Prize winner Paul Krugman speaking to students and faculty at Florida International University in Miami. During his lecture titled “The Crisis: Year Three” he did not sound too optimistic about the state of the economy, given the counterproductive gridlock in D.C. The only hope he voiced was that a technological breakthrough that transforms the entire economy -  similar in scale to the IT revolution - would move companies to invest their cash reserves. This would jumpstart the economy as the increase of investment spending with the multiplier effect would increase GDP and household income, which would in turn lead to more consumer spending, which would again lead to more investment spending and hiring on the part of the companies, resulting in a significant reduction of unemployment.

The technological breakthrough will come, it is just a matter of time. This century will be known for the ET (Energy Technology) revolution as New York Times columnist and author Thomas L. Friedman coined the term. Major changes in the way we generate, distribute, store and consume energy are inevitable given global demographic trends. Growing populations and prosperity meet finite resources and climate change caused by the the extraction of millions of years’ worth of stored carbon.

First signs of this new energy era can already be seen. Last month GM started selling its semi-electric Chevrolet Volt, sometimes also called a “plug-in hybrid”. Even though just a few hundred Volts have been sold so far, the market debut in the U.S. could mark the beginning of the electric revolution in the auto industry. If GM manages to turn a profit on the Volt some day, it will only be a matter of a few years until technological progress and mass production bring affordable, powerful electric cars to the streets with competitive driving ranges.

If you like to read more about this topic, take a look at my research paper

NEW ENERGY AGE RESEARCH PAPER

or at my Related Posts:

Auto Industry in Transition

The Fundamental Transition of the Auto Industry

Travelers going through New York City these days are experiencing similar disruptions due to excessive snow falls caused by a blizzard like many travelers in Europe a week ago. New York’s airports shut down and cancelled hundreds of flights, railroad companies switched to weekend or holiday schedules and driving became a nightmare as snowplows struggled to clear the streets.

 

As I already mentioned in last week’s post  “the recent travel chaos in Europe and climate change“, unusually high amounts of snow in winter or below-average temperatures don’t contradict the climate change theory.

  

Earlier this year Republican Senator Inhofe of Oklahoma built Al Gore an Igloo, mocking that global warming could not be an issue to worry about in the face of a very snowy week in D.C.

http://video.foxnews.com/v/4013671/senator-builds-al-gore-an-igloo/ 

 

According to The Telegraph, 2010 was one of the hottest three years on record. (http://www.telegraph.co.uk/science/8222843/2010-the-year-in-science.html)

Ice sheets and glaciers are melting at an accelerating pace. Hence more moisture is available and comes either in the form of excess snow in winter or excess rainfall in summer. Global warming means that the global average temperature is increasing with extreme weather events becoming more frequents. Some areas, however, may indeed experience a fall in temperatures, increases in precipitation as opposed to rising temperatures and generally drier conditions.

A leader leads by example not by force.

Opportunities multiply as they are seized.

- Sun Tzu

With Sun Tzu being one of the most famous, China has been blessed with numerous outstanding strategists in influential positions.

Sun Tzu, author of The Art of War, was an ancient Chinese philosopher and strategist who lived several centuries BC. Many of his quotes are well-known and his wisdom undoubted. Several times in Chinese history, brilliant minds in important positions within government helped the country thrive.

The unprecedented economic miracle that took place in China in the past two to three decades was not a miracle in the first place. The enormous rise China has been going through was the result of a thought-through step-by-step approach to bringing China back on the global stage of economic superpowers.

After the experiment of Maoism terribly failed, China’s leaders examined the recipes for success tested out by Hong Kong, Singapore and Taiwan. Determined to grow GDP, breaking with their ideology, special economic zones such as Shenzhen (just north of Hong Kong) were established to try if more or less authoritarian forms of capitalism could actually work in Red China.

As the capitalist experiment quickly showed favorable results, new special economic zones popped up all along China’s coastal areas and a rapid industrialization set in which attracted foreign capital inflows. Since that moment, when China’s leadership realized that it could make capitalism work for it, the rest of the story was mainly about finding the right balance between opening up and maintaining control and stability.

Even though China’s route to wealth was not smooth and had ugly side effects, it is hard to belie the country’s great achievements such as lifting hundreds of millions of poor farmers and peasants out of poverty which is unprecedented in history.

It took a lot of pragmatism, intelligence, patience and foresight for a number of leadership generations to accompany the transition. Attracting foreign investors to build manufacturing sites as well as R&D centers within a country whose government has absolute power and a strong national agenda was difficult. Nevertheless, the country became the biggest manufacturing hub of the world and is trying hard to attract foreign as well as to develop its own high tech production and research facilities.

Despite all achievements and progress, the challenges China is facing are huge: Lethal pollution, an unsustainable population size given the demographic development and the critical rights the government has to grant citizens and foreigners in order to move ahead and leave the low-cost manufacturing and export model behind.

At the moment China is implementing the third phase of its development strategy. As the coastal areas have almost caught up with the West in terms of education, infrastructure and GDP, dozens of cities further inland are in the process of becoming new industrial and commercial centers for Asia and the world.

Does the city of Chongqing sound familiar to you?

When you are thinking of some of the world’s biggest cities, places like Tokyo, Shanghai, Mumbai, New York and London might come to your mind. However, Chongqing beats all of these world cities in terms of population. It is in fact the largest metropolis on the planet - a boom-town by the Yangtze river. The Chinese sometimes refer to Chongqing as the Chicago on the Yangtze with the city’s recent face-lift in mind.  With an estimated population of more than 31 million and counting, Chongqing is already a success story where new riches are made every day and it has just started its way to global recognition and importance. The city’s mayor and regional Communist Party boss Bo Xilai is a political celebrity in China. His success in fighting corruption and organized crime seems to have put him on the path to a high-ranking position within the Communist Party’s inner circle. The Huffington Post recently named him “China’s Man of the Year” (http://www.huffingtonpost.com/2010/03/01/bo-xilai-chinas-man-of-th_n_480952.html).

Chongqing is only one example of the Chinese government’s “Go West” strategy aimed at developing regions in central China to maintain growth rates and provide employment for its growing work force as well as to stop the income gap between coastal China and central China to widen further.

In the coming years, we can expect to see some of the manufacturing move more inland while the coastal regions will see more high tech and research-centered endeavors as well as service industries move in.

One last aspect that needs to be mentioned when talking about China’s savvy strategists is the country’s efforts to move ahead in the field of alternative energy technologies. Electric cars and solar power are markets Chinese companies are targeting and might soon be ahead of Western competitors. Suntech Power, the world’s largest producer of photovoltaic modules and BYD Auto, a newcomer in the automobile business aiming to become one of the  world’s biggest car makers by leading the electric car revolution give us an idea what might be ahead.

If you are interested in learning more about the changing economic and political climate in China, I encourage you to take a look at the posts in my Category China page.

on China’s changing role in the world economy

China: A developed, green economy by 2050?

Berlin Tegel Airport, Europe snow chaos December 2010

Like tens of thousands of travellers across Europe, I got stuck at Berlin’s Tegel airport (TXL) for more than 10 hours on my way from Miami to Munich, Germany just a few days ago. Leaving Miami on a sunny day with temperatures well above 70 degrees, I arrived in Berlin about 9.5 hours later, hoping to make it to Munich within a little more than an hour. Instead of a quick transfer, I had to spend 9 hours more than expected in the terminal of Berlin’s major airport - which is expected to close in 2012 when Berlin’s brand new capital airport BBI (Berlin Brandenburg International) is scheduled to open. At the beginning, the atmosphere was rather relaxed with few people crowding the 1960s style terminal and cabs waiting outside in the snow for passengers headed to downtown.

However, as I was waiting in the departure area seeing dozens of domestic flights being cancelled as the snow kept falling, the once close-to-empty departure lounge filled with passengers and frustration spread quickly. Except for the operators of delis and kiosks, few people seemed to be in a good mood anymore. As many hours passed without a departing flight and the sun set, there was barely any space left for people to stand and except for one representative of the airport’s staff who couldn’t help anyone and asked passengers to check the airlines’ websites for information on flights, frustration and rumors spread. My only source of information was a relative who updated me on what it said on my airline’s website and I had to stay in my place since I didn’t want to loose my seat while the departure date of my flight was pushed back numerous times from 10.15am to 9pm.

After 10 hours of waiting I was among the lucky few of the waiting passengers that got a seat on the last flight allowed to leave Berlin that night. I shook my head in disbelief when I had to hear the captain’s excuse for another delay of our departure: Apparently there was only one baggage handler set aside for our aircraft even though only a hand full of flights departed from TXL instead on the usual 400 or so aircraft arriving and departing. The low number of flights departing that day ensured that we quickly went through deicing and were ready to take off, despite the chronically scarce deicing chemicals.

When I made it to Munich that same day shortly before midnight, I was happy that I finally reached my destination even though my luggage didn’t make it to there, given all the chaos in European air travel I learned about reading a left-behind newspaper while standing in the baggage tracing line.

Altogether I can consider myself lucky. A friend of mine got stuck in Frankfurt for 20+ hours. Any traveler going through London Heathrow inevitably had to change their travel plans as the airport closed down completely due to a mere 4 inches of snow. The airports in the Paris metropolitan area also had to cancel most flights scheduled to depart. Train service in most of northern and central Europe was disrupted as well. In Berlin, rental car companies were unable to satisfy demand since a newly passed law required cars to have snow tires given wintery weather conditions and the number of snow tires stored was quickly depleted. Also, driving conditions were poor. Icy roads led to countless accidents, long traffic jams formed on several highways. In some parts of Germany, classes were cancelled.

What is unusual about the current situation is that primarily areas that normally don’t get a lot of snow, at least not during this time of the year, were affected severely and obviously were not prepared to deal with snow. In other areas where snow is usually more abundant, travel was less affected and snow levels were lower than on average.

What could be an explanation for these weather anomalies?

In the face of an uncommon amount of snow or much colder than usual temperatures, I hear people joke about how much they wish global warming was actually happening so they wouldn’t have to clear the sidewalk in front of their house from all the snow. It is in these situations when we need to remember that “global warming” is actually a bad term to describe what is happening to our climate as a result of the unprecedented increase in the levels of carbon dioxide and other greenhouse gases in the atmosphere since the onset of the Industrial Revolution. Rather than increasing temperatures in general, we will see changes and anomalies that will change average temperatures, precipitation, the frequency of extreme weather events, etc. Some places might experience a decrease in average temperatures and rainfall while others will face more frequent droughts and hotter summers. While global average temperatures are generally increasing which causes catastrophic effects in coastal areas around the world in the long run, local impacts of climate change can vary widely and also could benefit certain areas.

This winter’s travel chaos in northern central Europe is most likely an indicator of a changing climate and how it changes weather patterns. Since my childhood, I witnessed how the amount of snow in southern Germany gradually decreased and how winter shifted from December through March to January through April. While when I was younger, lots of snow for at least three months was common, nowadays periods of above-average temperatures and a lack of snow occur frequently. This causes frequent difficulties for nearby winter sport resorts. On the other hand, relatives of mine who live on the shore of the Baltic sea experienced white Christmas in recent years which they had not seen in decades.

If you are interested in learning more about my research about climate change, energy politics and alternative energy technologies, take a look at my research paper research-paper_new-energy-age-staedtler-2010

Unlike any other species on this planet, humans have made significant changes to the surface of the earth. Rather than adapting to their environment, humans successfully changed it to suit their way of life. Over the millennia, this has led to unprecedented wealth. However, this wealth is unevenly distributed. To date, a high level of prosperity automatically results in high per capita energy consumption. This satellite image of planet earth by night shows very accurately where living standards are the highest and where they are lower:

Economic progress and energy consumption are proportional. Therefore it comes as no surprise that the United States, the European Union, Japan and the rapidly developing coastal regions in East Asia are having some of the highest energy consumption rates in the world. As long as only a tiny fraction of the earth’s population enjoyed a high living standard, the visible downsides were negligible. But today, a significantly larger portion of the world’s rapidly growing population is enjoying a high and energy intensive living standard and their number is growing quickly. At the same time, the world’s reserves of fossil fuels such as coal, oil and gas are gradually becoming depleted. And in addition, the negative implications of conventional energy generation for the environment are becoming more and more obvious.

The mega-trends of population growth, global industrialization and urbanization are intensifying climate change, resource scarcity and pollution. Unless a more sustainable foundation for economic growth can be found, the deterioration of these problems can undermine the basis of our prosperity.

Therefore, significant changes need to be made to the way we generate energy to make it more sustainable. This means increasingly tapping energy sources that are less harmful to the environment and not as scarce as many fossil fuels. But this diversification and enhancement of our energy mix takes a lot of time and money.

Hence, it is necessary to address the problem from the consumption side as well. Key to a quick, effective and feasible solution is to decouple economic growth and energy consumption. In other words, we have to seek ways to increase our prosperity while reducing our consumption of energy. Those two goals long thought to be in opposition can become complementary.

If there’s a tendency of growing energy demand, one can respond to it in two different ways:

1.) Building more power plants to increase the supply of energy. This approach ties up financial and natural resources alike.

2.) Making energy consumption more efficient to reduce demand for energy. These efficiency gains can soak up rising energy demand elsewhere without the need to build additional power plants.

Obviously, the second approach is smarter and more sustainable. By squeezing more out of every kilowatt-hour of electricity or gallon of gas, you eliminate waste. Eliminating waste benefits the society and the environment.

Buildings account for 40% of the total energy consumption and 70% of the total electricity consumption in the United States. The potential for savings is enormous. Thus, a “green” building can be significantly cheaper to operate than a conventional building.

Especially for businesses with large production facilities, energy is a major cost factor. Optimizations to the production process as well as to the lighting, water circulation and air-conditioning systems can trim a factory’s energy consumption. The resulting cost savings can quickly recover the initial costs of the energy conservation equipment.

When building a new factory, a design aimed at energy efficiency can bring down expenses for water and electricity even further. An optimal design reduces the need for artificial light by using natural light as well as occupancy sensors. Better insulation and facades that reflect a large share of the sunlight reduces heat absorption. In combination with measures to improve the air circulation within the building, less cooling in summer and less heating in winter  is necessary. Over the life of the facility, the achieved savings can match or exceed the initial construction costs. Another benefit is the lowered carbon footprint. Lower energy consumption translates into lower energy bills and lower carbon emissions. Consequently, a green factory is not only a question of environmental responsibility. From an economic point of view, green buildings are the best response to rising and volatile energy prices.

Private homes can take advantage of modern energy conservation technology as well.  By monitoring electricity consumption throughout the house to detect sources of energy waste, a household could cut its monthly energy bill when replacing inefficient home appliances and adjusting the thermostat to avoid unnecessary cooling and heating. As the construction of a smarter electricity grid advances, appliances can be timed to take advantage of cheaper electricity rates during off-peak hours.

Since energy prices are bound to increase in the medium and long term, the savings achievable through energy conservation efforts will increase and hence, demand for those technologies will help to support a domestic energy technology industry.

The global market for energy saving technology is enormous. China, a country struggling to meet its energy needs, is going to invest heavily into energy conservation technology for buildings. A massive immigration into the urban centers of the country is under way and the infrastructure, buildings and factories built today determine the energy consumption of the future. Instead of further increasing its reliance on foreign suppliers of fossil fuels, China will use every opportunity to reduce energy waste.