Or the end of the beginning?
I. The Beginning of The End
1. The Rise.
On September 24, 2007 Ecuador´s President Rafael Correa addressed the United Nations. His subject: climate warming. He offered a daring, creative, unprecedented project:
"The Initiative of the Ecuadorian Government is to maintain crude oil in the ITT area underground. The ITT is a reserve located in a highly delicate, ecological park called Yasuní. The Initiative means the commitment to not exploit nearly 920 million barrels of oil, thereby conserving one of the most biologically diverse regions of the world. Nevertheless, this Initiative will mean that Ecuador will not receive enormous investments and nearly 720 million dollars per year. This is a very significant amount of money for a small country of 13 million habitants with about 6 million in poverty. We are prepared to make this immense sacrifice, but we are demanding co-responsibility from the international community and a minimum compensation for the environmental goods that we generate and from which the entire planet benefits.
The Yasuní-ITT Initiative...will prevent the emission of around 111 million tons of carbon produced by the burning of oil. The lost opportunity to Ecuador for not exploiting the crude oil is at least 10 to 15 dollars per barrel. Nevertheless, Ecuador is asking from the rest of humanity a contribution of only 5 dollars per barrel to conserve Yasuní´s biodiversity, to protect the indigenous population that lives in the area in a voluntary isolation, and to prevent 111 million tons of carbon dioxide emissions. The total amount we are requesting is approximately 4.6 billion dollars. This would be an extraordinary example of world-wide collective action to reduce global warming to the benefit of the entire planet." [My translation]
The amount Ecuador sought in contributions was finalized at $3.6 billion over a 12-year period. This initiative -- backed by 92.7% of Ecuadorians -- became known as Plan A.
2. The Decline.
In August 2013, the Ecuadorian government revealed that, after six years, only $13 million had been collected -- less than 1% of the $3.6 billion goal. Another $323 million had been pledged but not delivered. The handwriting was on the wall.
3. The Fall.
On August 15, 2013, President Correa tossed out Plan A. "The world has failed us," he declared. ("El mundo nos ha fallado.")
Enter Plan B:
Drill 838 million barrels of crude oil in the Yasuní ITT. In the coming weeks, Ecuador´s state oil company Petroamazonas will enter the area. Total expected revenues for Ecuador: $18 billion.
Cui bono? Who benefits?
President Correa says the money will be used to benefit poor people.
The New York Times reported:
"China, which has become the largest source of financing for the Ecuadorean government as it seeks to secure more oil supplies from Latin America, is a likely beneficiary of any increased Ecuadorean production. In July, Ecuador obtained a $2 billion loan from the China Development Bank in exchange for nearly 40,000 barrels a day of oil from Ecuador to PetroChina over two years."
No sooner did President Correa announce the death of Plan A, opposition hit the streets and airways. Among others, February´s failed presidential candidates from the right (Guillermo Lasso) and left (Alberto Acosta) initiated drives to sink Plan B.
Are the wheels starting to come off Correa´s unstoppable political machine?
Clearly, he and his political party, Alianza País (AP), were caught flat-footed by the extent of public shock and dismay at the demise of Plan A, which had become emblematic of the Correa administration. Flat-footed, because AP legislators´ defense of Plan B is weak/weaker/weakest.
Four standard arguments:
(i) Oil is already being drilled in the Yasuní Park, so what difference do a few more oil platforms make? Honorable AP Representatives, people are already committing murder -- to be exact, 466,078 worldwide in 2012; does that make it O.K. for you to kill somebody? I mean, what´s another murder or two?
(ii) Evil "capitalists" and their corrupt governments are "hypocrites." They bray and crow how they want to protect the environment, but when push came to shove, they kept their wallets in their pockets, dooming Plan A. Honorable Representatives, when President Correa presented Plan A to the U.N., whom do you think he was talking to -- a Boy Scout troop? Your self-righteous indignation is based on what, exactly?
(iii) What do you think President Correa´s Plan B -- which you defend -- is? Revolutionary socialism? Incidentally, do you really and truly believe China is not a capitalist nation?
(iv) There are no uncontacted Indians in the ITT; therefore, drilling is permitted (see below). Honorable AP Representatives, you had better read again our excerpt from President Correa´s U.N. speech. Was he lying then or are you lying now? -- that is the box you created for yourselves.
Why the presence of uncontacted Indians is crucial:
Ecuador´s Constitution (Title II, Chapter 4, Article 57, Clause 21): "The territories of Indian tribes living in voluntary isolation are of ancestral possession which is irreducible and intangible, and in them all types of extractive activity are prohibited." ("Los territorios de los pueblos en aislamiento voluntario son de posesión ancestral irreductible e intangible, y en ellos estará vedada todo tipo de actividad extractiva.") Tribes in voluntary isolation are nomadic, which makes definition of their "territories" not readily apparent. Is the ITT one of them? As of the moment, the issue has not been resolved. Reports circulated this morning that prior Ecuadorian administrations recognized in writing the presence of such tribes in the ITT.
Will Indians with blowguns and spears doom Plan B and $18 billion? Stay tuned...
The heart of the anti-Plan B movement has three valves:
(i) Plan B was the only plan that ever really existed. Plan A was gigantic hoax, a fraudulent dog and pony show to make acceptable what was unacceptable to the overwhelming majority of Ecuadorians: drill oil in Yasuní ITT.
(ii) President Correa declared he will personally oversee ITT drilling to make sure it is ecologically "responsible," that it will employ the cleanest state-of-the-art technology, and that it will effect only a thousandth part of the Yasuní. The opposition claims he is at best mistaken, at worse lying -- that the best technology is not good enough and will cause grave and irreversible environmental damage over a large area.
(iii) President Correa claims that due to the "hypocrisy" of other nations, Ecuador now faces a dichotomy: either no drilling and continued poverty in Ecuador or Plan B´s limited/responsible drilling and the elimination of poverty. The opposition argues Correa is a victim of his own good numbers: poverty in Ecuador has fallen 16.6% in 10 years -- 4.7% in 2011 alone. So, who needs ITT drilling? What´s the rush?
And, what´s the truth?
* * *
Unlike políticos in Quito, Guayaquil, Berlin and Washington, we have no interest in affixing the blame for Plan A´s failure. The reason is, the guilty party is as readily apparent as he is easy to find: in the mirror. We have a different explanation of why Plan A collapsed -- an explanation nobody is mentioning.
Also, we have no interest in fighting Plan B which, exceptional circumstances aside (see above), we believe is a done deal.
We are deeply interested, however, in lessons learned in Ecuador for other nations with valuable natural resources, which are contemplating a Yasuní Plan A-type project. We know you are out there. We also know there will be more of you in the future -- a lot more.
To date, the lessons are 10 in number.
Lesson 1 is conspicuous in the AP´s arguments mentioned above in defense of Plan B. If you must abandon your Plan A and take your natural resource to market, do not go on TV and try to take the capitalism out of capitalism. You will only look clumsy, naive. Instead, say what you are doing -- and be done with it.
President Correa, an economist, noted in his August 15, 2013 speech that delivered the death notice of Plan A: "I think the Yasuní initiative was ahead of its times and that we had bad luck, because the launching of the project coincided with the worse global economic crisis in the last 80 years." ("Pienso que la iniciativa se adelantó a los tiempos y también hemos tenido mala fortuna, ya que el lanzamiento de la iniciativa coincidió con la peor crisis económica global de los últimos 80 años.")
Given the downturn in the world economy that began in 2007-8, the original terms of Plan A -- $3.6 billion in contributions over 12 years -- should have been changed to meet new international realities. This point was made forcefully by Yolanda Kakabadse, former Minister of The Environment of Ecuador. President Correa made no significant adjustment in Plan A, thereby adding fuel to fire of the opposition´s argument that he was running a Machiavellian scam, that he secretly always wanted only Plan B and wrecked Plan A by imposing impossible conditions.
The amount requested for not extracting a natural resource, then, must be flexible in both its end and means, i.e., tied to economic indexes of the world economy, inflation and the price of the natural resource.
Lesson 3 is inherent in lesson 2. A nation contemplating a Plan A-inspired project should make an in-depth calculation of the amount of contributions both rationally needed and realistically possible. That leads to
Lesson 4. The donor-part of the calculation can only begin to be reasonably determined by holding intensive and extensive discussions with potential donor nations and organizations. Do not expect your agenda to be their agenda; it isn´t. Do not expect the righteousness of your cause to carry the day; it won´t. Finding donors for a Plan A-type project requires a rigorous transparency and responsiveness above and beyond anything seen so far.
Lesson 5 concerns liquidation.
$336 million in pledges and actual donations to Ecuador´s Plan A are not to be sneered at. By liquidating the plan six years ahead of time, President Correa created a bone of contention: what happens to the $13 million collected? Answer: only donations over $50,000 will be refunded. That ruling no doubt came as a nasty surprise to small contributors. Even big nations are rattled: Germany, a world leader in ecology, is spatting with Ecuador.
Lesson 6. To avoid unnecessary and bitter conflicts caused by liquidation, until the final goal is reached, donations can be designated as postponements of resource extraction and pollution. A My Way or The Highway dictum -- $3.5 billion in 12 years or forget it -- can be replaced by a pay-as-you-go process. To clarify: if a Chicago high school contributes $1,000, the students will have here and now the knowledge and satisfaction they postponed X quantity of world pollution for Y period of time.
Postponements and non-extraction forever are not mutually exclusive. When and if the final funding goal is achieved, the project and donations end. The natural resource stays in the ground.
Lesson 7 arises out of Lesson 6. Rather than focusing almost exclusively on nations, organizations and rich individuals, a pay-as-you-go process would allow a vast number of small individual donors to participate easily. To inform and mobilize them, effective marketing techniques developed elsewhere can be employed. An example from the world of telethons: an internet scoreboard could display the final goal of money sought, the amount each contribution makes to reach it, the amount of world pollution each contribution postpones and for how long, as well as -- if the contributor wants -- his name.
If you want to raise ecological awareness in the world, pay-as-you-go is the way to go.
Lesson 8. What if, despite everything, adequate funds for a Plan A project are not forthcoming?
Ecuador showed liquidation is not a desirable option. Two alternatives: go ahead and extract the resource (after having effectively postponed it via contributions) and/or hold a public referendum.* In Ecuador, both alternatives are currently in the works.
We already looked at extraction -- Plan B´s 836 barrels of oil for $18 billion. As for a referendum:
In Ecuador referenda can be initiated by the president, the National Assembly, or the people. President Correa and Assembly leaders have announced they will offer no national referenda on Yasuní. That leaves the people to introduce any nationwide plebiscite -- and that is exactly what is happening.
On August 22, political parties and various ecology, student and Indian groups submitted to Ecuador´s Constitutional Court this proposed referendum: "Do you agree that the Ecuadorian Government should keep the crude oil in ITT, known as Block 43, indefinitely in the ground?" ("¿Está usted de acuerdo que el Gobierno ecuatoriano mantenga el crudo del ITT, conocido como bloque 43, indefinidamente bajo suelo?")
If the Court rules that the referendum is constitutional, 600,000 signatures must be collected within 180 days. The vote would take place in February 2014, when nationwide elections are scheduled.
President Correa´s attitude regarding the referendum: "¡'Maravilloso! We will win again, just like before." Two facts support him:
(1) A Cedatos Gallup poll of 2,100 Ecuadorians showed 56% support President Correa´s decision to drill for oil in the ITT, 32% oppose it, 12% "other."
(2) Read the proposed referendum again. It does not resurrect Plan A.
The referendum demands that Ecuadorians shoulder 100% of the financial burden -- the missed opportunity -- of keeping the ITT oil in the ground. Gone are Plan A´s donations from foreign nations, co-responsibility for not polluting the environment, and uniting the international community in an anticlimatic warming project.
100% of the burden. All or Nothing usually begets nothing. Which is why, barring extraordinary developments between now and February, the referendum was born in a coffin. I think it was written in a rush. Which brings us to Lesson 9 for any nation with a failed Plan A and looking to a popular referendum for guidance:
To make a referendum meaningful, its drafting should address concerns raised here, e.g., flexibility and realism. A better Plan A -- that is the challenge.
Otherwise stated, whether instituted by the president, the legislature or the people, the wording of a referendum is everything. During the eight years I worked as the chief of staff to the Majority Floor Leader in my state´s House of Representatives, I worked on over a 100 referenda in the form of proposed constitutional amendments. In every case, the amendment´s wording determined the outcome.**
Profits are made by drilling oil, not by keeping it in the ground forever. When President Correa announced the death of Plan A, oligarchs around the world sniggered in their Cloudberry liqueur, munched on Cheez Whiz-slathered hors d´oeuvres, dined on cookie-cutter shark meat posing as Coquilles Saint-Jacques. They want -- desperately so, given the billions of dollars at stake -- you to believe that the death of Ecuador´s Plan A was the beginning of the end of any and all similar plans.
We have a different take on things...
II. The End of The Beginning
No fairer destiny could be allotted to any physical theory,
than that it should of itself point out the way
to the introduction of a more comprehensive theory,
in which it lives on as a limiting case.
-- Albert Einstein, Relativity: The Special and General Theory, chapter 22 --
In the beginning, there was roughness...
Full transparency and responsiveness from A to Z; flexibility of ends and means in the international arena; realistic expectations regarding donations; a pay-as-you-go process versus an All or Nothing edict; a firm "no" to liquidation (confiscation?); effective marketing; a responsible and meaningful referendum: in the birth and death of Ecuador´s Plan A, mistakes and misunderstandings abound. President Correa, the principal/principle protagonist, admitted he was not exempt. But Plan A showed something else. He was a pioneer. If pioneers were normal people, they wouldn´t be pioneers.
I suspect President Correa would be a difficult man to work for.
4. The Rise.
In announcing its death two weeks ago, President Correa declared that Plan A was "ahead of its times."
How? He did not say.
His speech to the U.N. in 2007, however, gave this elaboration:
"The Ecuadorian proposal seeks to transform the old concepts of economy and of value. In the market system the only value possible is the value of exchange, or price. The project Yasuní ITT is based above all on the recognition of the values of use and service, of the non-monetarized values of environmental security and the maintenance of planetary diversity. The proposal involves a new economic logic for the 21st century, where the generation of values is compensated and not solely the generation of commodities." [My translation]
We explored in depth the core of President Correa´s new economic logic in The Big Movida: The Third American Revolution (chapter 13), as well as in our post of January 17, 2012 ("Toward a New Political Economy." To wit:
The old concept views the economy as consisting of only three sectors:
(i) Extraction (mining, fishing, agriculture).
(ii) Manufacturing (cars, refrigerators).
(iii) Services (accounting, teaching).
Where does Ecuador´s Plan A -- monetary compensation for the NON-extraction of a natural resource -- fit?
President Correa called non-extraction and the resulting clean air an "environmental service." Plan A, then, belongs in the service sector.
Long-term developments could dramatically change that categorization as a service...
As the world becomes more polluted, providing clear air will become more and more QUALITATIVELY distinct from traditional services. Unlike accounting or teaching, clean air is (1) an absolute physical necessity that will become (2) absolutely scarce on a planetary scale. Finally, the present condition of clean air as a good to which access is (3) open and free, will end.
The coming epoch of absolute scarcities of absolute necessities, notably of clean air produced by the Amazon, will be unprecedented in human history. Economics will be transformed necessarily, by the force of events. The reason:
The secret to economics is no secret at all: human values. From Adam Smith to Karl Marx to John Maynard Keynes to Paul Samuelson, there is fundamental agreement of that point.
If human history has shown anything, it is that to date economic values have been impervious to learned treatises, moral precepts, or good will. You may think that high school teachers "should" be paid more or that high-flying PDGs "should" be paid less. You know, however, that in today´s world, "it" does not work that way.
The coming epoch of absolute scarcities of absolute necessities will compel what logic, reason, morality and good intentions failed to achieve: a change in values and of the economic system they maintain and distribute. In that portentous transformation, the environmental service of supplying clean air could metamorphose in two directions. Neither excludes the other:
(1) The creation of an entirely new economic sector -- NON-extraction of natural resources -- in addition to the traditional ones of extraction, manufacturing and services.
(2) Adam smith identified land, labor and capital as "the three original sources of all revenue as well as of all exchangeable value. All other revenue is ultimately derived from some one or other of these."***
In the coming world of scarcities of necessities, non-extraction of natural resources could form a new, fourth original source of revenue and exchangeable value. This outcome would be far more profound in its consequences than either a new service or new economic sector. Indeed, a new original source could revolutionize, among other things, the inherent nature of services and economic sectors.
In his U.N. speech, President Correa referred to a change in the concept of value. He also said it was precisely that change to which Plan A was directed -- a new economic logic.
In converting (i) "NON-use" value (keeping a natural resource in the ground) into (ii) use value that is (iii) compensated,**** Ecuador´s Plan A was a living oxymoron: a physical theory.
We come to the bottom line:
Plan A failed for the same reason it was ahead of its time: the human values to foster and sustain it have not yet constellated. But they will someday -- inevitably so, given the continuing degradation of our planet.
For nations considering a Plan A project for their natural resources -- Venezuela´s oil, Bolivia´s silver and lithium, Brazil´s fresh water -- the level of growth of those values in the world community is the key. That level is literally where it´s at. That is, I think the biggest lesson -- number 10 -- Ecuador´s experience offers.
The collapse of Ecuador´s Plan A showed for all to see, we have a long way to go.
Because of the continuing deterioration of the world´s environment, Ecuador´s Plan A will rise again, live on in other plans. That resurrection is why 100 years from now, the world will be talking of Rafael Correa. Bush and Obama will join Presidents Millard Fillmore and Franklin Pierce -- bumps on a log.
A physical theory plays by its own rules. Plan A did not die when it died. August 15, 2013 was not the beginning of the end; rather, it was the end of the beginning.
Post Script -- September 14, 2013. This post is receiving more visits than anticipated -- over 1,000 in three days. Given the extraordinary interest, I will keep the post active longer than is customary.
Coming soon: the world´s greatest lost treasure story.
*Except for proposed constitutional amendments, the United States does not allow national plebiscites. Only an amendment to the United States Constitution can provide for them.
National referenda are necessary, but not sufficient, to resurrect and remodel the polity -- the oligarchy/democracy hybrid moderated by a large middle clsss, which was created by The Founding Fathers. In 2007-8 the polity fell, and was replaced by an oligarchic system. See this blog, The Big Movida: The Third American Revolution, Chapter 2.
**A proposed amendment on the ballot in my state bore the title "Limiting State Legislators´ Per Diem to $75.00." Sounds good. However, legislators were actually receiving $50.00 a day, so the referendum would have granted them a pay raise. Because of its trickster, kewpie-pie wording -- exposed by us in the media -- the amendment crashed and burned. Poll data indicated that had it been straightforward, the amendment would have passed.
***Adam Smith, The Wealth of Nations, Penguin Books, London, England, 1997, pp. 155, 356.
****Adam Smith: "The word VALUE, it is to be observed, has two different meanings, and sometimes expressed the utility of some particular object, and sometimes the power of purchasing other goods which the possession of that object conveys. The one may be called ‘value in use’; the other, ‘value in exchange’. The things which have the greatest value in use have frequently little or not value in exchange and, on the contrary, those which have the greatest value in exchange have frequently little or no value in use. Nothing is more useful than water: but it will purchase scarce anything; scarce anything can be had in exchange for it. A diamond, on the contrary, has scarce any value in use; but a very great quantity of other goods may frequently be had in exchange for it." Ibid., pp. 131-2.
Get ready: Adam Smith’s observation of water -- especially potable water -- as having little or no exchange value is on its way out.