What the Nordic mixed economy can teach today’s new left

Much of Scandinavia’s success is not rooted in direct state intervention

Martin Sandbu




The most predictable phenomena can also be the most surprising. Just look at the revival of “socialism” as a politically viable idea in the US and UK.

Ten years ago, the global crisis laid bare the failures of financial capitalism. This gave the political left an opportunity to win support for its agenda. Yet almost every established centre-left party in the developed world bungled this shot at political dominance.

Instead of a comeback, we seem to be getting a throwback. The only leftwing politicians to prosper have been those who reject the “third way” centre-leftism of the 1990s. In the UK, Jeremy Corbyn has taken over the Labour party with the support of a hugely expanded membership. In the US, Bernie Sanders’ socialist primary campaign gave Hillary Clinton a run for her donor class money in 2016. In recent local results, like-minded politicians Alexandria Ocasio-Cortez and Rashida Tlaib have won safe-seat Democratic party nominations to Congress. Polls show that about half of young Americans now favour “socialism” over “capitalism”.

This has triggered a debate about what the new socialists mean by “socialism”. On one reading, it is just an aspirational label for Scandinavian social democracy, with policies such as universal healthcare or better conditions for workers.

But some of its most thoughtful proponents argue in favour of socialism because it is opposed to capitalism. The political theorist Corey Robin, for example, advocates “socialism” because it makes workers free, while capitalism leaves them unfree. Such claims see socialism and capitalism as rival and incompatible systems.

This semantic difference matters politically. The either/or view may have made sense during the cold war. But even when the dichotomy was real, the Nordic countries were clearly arrayed on the capitalist side of the dividing line. To oppose “socialism” against “capitalism” is to refuse to learn from the experience of the societies that have probably come closest to the new socialists’ own ideals.

The Nordic countries have been called “mixed economies” precisely because they combine elements of socialism and capitalism: state and private ownership of the means of production; public regulation and market competition; redistributive taxes and wages determined by employers and employees.

If the socialists of today ignore capitalism’s role in that mix, they fail to follow their own leading lights. Here are three lessons they should heed from the Nordic model, whether or not they call it “socialist”.

First, it embraces globalisation. It was no coincidence that the Nordic mixed model emerged in countries with high exposure to international trade. Public understanding that trade brings prosperity, but that global fluctuations hit hard and unpredictably, increased support for the insurance elements of the Nordic welfare states.

So if “socialism” it is going to be, it should be a socialism confident about economic openness. The US left’s opposition to trade deals weakens any affiliation it may try to claim with the Nordic model. So does British socialists’ seduction by “ Lexit” — the alleged leftwing case for escaping the rules that smooth trade between European countries.

Second, while the Nordics’ economic egalitarianism is well known in broad terms, the detail is not. But the detail matters. The achievement of the Nordic model is something very specific: a highly compressed distribution of market wages (before taxes and transfers). In comparison, the distribution of wealth and capital income, and the degree of income equalisation through policy, is unexceptional. The Nordics succeeded not through maximal redistribution but by engineering an economy that did not need to overburden the state’s redistributive power.

This leads to the third lesson. Much of the Nordic model’s success is rooted not in direct state intervention but in the finely balanced interplay between social organisations, especially in the labour market. Admirers appreciate the role of unions in the Nordic economies; they are less aware of the equal importance of coherent employers’ associations.

A blinkered workers-against-bosses view of the world suggests anything that makes capital owners better organised must harm the interests of workers. The Nordic experience shows the opposite is true. Coherent organisation encourages employers to recognise how what may seem like a burden on an individual company benefits business as a whole.

In Scandinavia, a compressed wage structure has been good for productivity. If it is expensive to use labour unproductively, and if high-skilled labour is relatively cheap, companies accelerate investment and quickly adopt new technology. Similarly, an organised employer sector helps workers, businesses and the government to adjust in the face of technological disruptions. If this is socialism, it is one that makes for a more flexible capitalism.

The Nordics, then, give vindication to the insight of great liberal centrists of the interwar years: that wise government intervention is good for capitalism, and makes capitalism good for workers. Progressive centrism may have earned itself a bad name in the run-up to the crisis and its aftermath. But if socialists reject it out of purism, they will find their own goals frustrated as well.

 More Emerging Market Chaos – How Long Before It Spreads To The Developed World?  

Emerging market chaos is now front page news. Let’s start with Argentina, where the peso has resumed its plunge:

Argentine peso emerging market chaos

In response:
Argentina Central Bank hikes interest rate to 60 percent
(AP) — Argentina’s Central Bank has increased its benchmark interest rate to 60 percent in efforts to halt a sharp slide in the value of the peso. 
The sliding value of the currency prompted Argentina to seek a financing deal earlier this year with the International Monetary Fund and President Mauricio Macri now is asking for an early release of those funds. 
The peso slipped about 7 percent againstthe dollar Wednesday and was down another 5 percent early Thursday. It’s been trading at 35.9 to the dollar.
The Central Bank said Friday that it was hiking its benchmark interest rate in response to the current currency scenario and the risk of greater impact on local inflation. The rate was set to 45 percent earlier this month.

It’s hard for developed world readers to grasp the implications of 60% interest rates. Suffice it to say normal life is on hold – in some cases permanently – for most Argentines.

Brazil, meanwhile, has currency issues of its own, with the real falling hard in the past year. But a much bigger problem is looming just across the border, where Venezuela is in the throes of a full-on hyperinflation that’s sending its citizens fleeing in every direction. In response:
Brazil sends army to border as Venezuelans flee crisis at home
(Reuters) – Brazil said it was sending armed forces to keep order near the Venezuelan border area, while Peru declared a health emergency, as a regional crisis sparked by thousands of Venezuelans fleeing economic collapse escalated on Tuesday. 
In Brazil, where residents rioted and attacked Venezuelan immigrants in a border town earlier this month, President Michel Temer signed a decree to deploy the armed forces to the border state of Roraima. He said the move was aimed at keeping order and ensuring the safety of immigrants. 
Peru, meanwhile, declared a 60-day health emergency in two provinces on its northern border, citing “imminent danger” to health and sanitation. The decree, published in the government’s official gazette, did not give more details on the risks, but health authorities have previously expressed concerns about the spread of diseases such as measles and malaria from migrants. 
The exodus of Venezuelans to other South American countries is building toward a “crisis moment” comparable to events involving refugees in the Mediterranean, the United Nations said this week. 
Temer blamed the socialist Venezuelan government of President Nicolas Maduro for the migration crisis. 

“The problem of Venezuela is no longer one of internal politics. It is a threat to the harmony of the whole continent,” Temer said in a televised address. 
There are close to 1 million Venezuelans now living in Colombia and more than 400,000 in Peru, the countries said in a joint statement after the meeting on Tuesday. Just 178,000 of those in Peru have legal permission to stay or are being processed.

Turkey, whose authoritarian government is causing turmoil both at home and with its NATO allies – most notably the US – has been trying to manage a currency crisis for months, but this week central bank officials started leaving and the the lira’s plunge resumed.

Turkish lira emerging market chaos

Turkish lira extends slide amid reports central bank deputy governor resigning

(MarketWatch) – The Turkish lira extended its slide Thursday amid news reports the deputy governor of the nation’s central bank will step down. The U.S. dollar hit an intraday high of 6.84 lira in earlier action and remains up 4.6% near 6.76 lira.  
Reuters, citing two persons familiar with the matter, reported that the deputy governor and Monetary Policy Committee member, Erkan Kilimci, was set to resign. Lira weakness this year has been exacerbated, analysts say, by Turkish President Recep Tayyip Erdogan’s pressure on the central bank not to raise rates. The lira is down more than 40% versus the dollar in the year to date, a slide that raised concerns about potential ripple effects on other emerging markets and about exposure to Turkey by some European Banks.

Last but not least, Italy has to be included in any discussion of emerging market chaos because compared to most of the rest of the EU it fits the profile, which is to say it’s financially and politically unstable and is thus always teetering on the edge of crisis. This might be the year it finally drops into the abyss, as its interest rates have risen to levels where the numbers no longer work.

Italian 10-year bond yield emerging market chaos


Note that as recently as May Italy was able to borrow 10-year money for less that the US could.

But lately it’s having to pay quite a bit more. The only reason its financial markets and banking system even exist in their current form is the artificially cheap money engineered by the ECB’s unlimited buying of Italian bonds. Take that away – which is now happening as the ECB stops indulging what it sees as an unreasonable new Italian government – and interest costs will bankrupt the country in short order. Stay tuned on this one.

So here we are with emerging markets in crisis but US financial markets completely oblivious.

There are two reasons for this, one reasonable at least in the short run, the other both baffling and infuriating.

Reason one is that in a world of emerging market chaos, the US – even with an unpredictable government – looks like the safest place to park capital. In other words, Amazon shares and Miami condos, even at record-high prices, are less risky than, say, a Brazilian bank account.

Fair enough.

Reason two is that since the 1990s the Fed has responded to every crisis anywhere in the world by bailing out the US banking system, and everyone has concluded that that’s just how the world works.

Trouble starts, the Fed cuts rates, and stocks, bonds and houses go up, problem solved. Without the slightest doubt, the Fed will respond that way again should the current EM crisis start to metastasize unacceptably. But will it work this time, with global debt roughly double what it was the last time the world was bailed out by its central banks? And how big will the financial market crisis have to be to shift the Fed and ECB from tightening to next-gen QE?

If events follow this script, we can expect a scary few months followed by plunging interest rates and massive, coordinated asset purchases by central banks. Which ought to be great for gold.

domingo, septiembre 23, 2018

WHALE OF A TIME: CHINA´S BANKS / THE ECONOMIST

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Whale of a time: China’s Banks
 
Industrial and Commercial Bank of China, the world’s largest bank by assets, reported strong mid-year results today, with net profit 5.8% higher than the same period last year. But beware of extrapolating to the rest of the financial system. Fortunes have diverged sharply. Big banks are in good shape but their smaller peers are hurting. As the government tries to defuse economic risks, it has curtailed dodgy lending practices and reined in overall credit growth.  
 
Defaults have jumped: for the banking sector as a whole, non-performing loans increased by a record last quarter. In order to limit the pain, regulators have called on well-capitalised big banks to expand their lending. They are seizing the opportunity to gobble up market share and cherry-pick the safest borrowers. This is far from ideal for the economy. Large state-owned banks favour stable, stodgy state-owned enterprises over scrappy, innovative private firms. The big get bigger.
 


With Ships and Missiles, China Is Ready to Challenge U.S. Navy in Pacific

By Steven Lee Myers


China’s first aircraft carrier, the Liaoning, at sea in April. First launched by the Soviet Union in 1988, it was sold for $20 million to a Chinese investor who said it would become a floating casino, though he was in reality acting on behalf of the People’s Liberation Army Navy.CreditCreditAgence France-Presse — Getty Images


DALIAN, China — In April, on the 69th anniversary of the founding of China’s Navy, the country’s first domestically built aircraft carrier stirred from its berth in the port city of Dalian on the Bohai Sea, tethered to tugboats for a test of its seaworthiness.

“China’s first homegrown aircraft carrier just moved a bit, and the United States, Japan and India squirmed,” a military news website crowed, referring to the three nations China views as its main rivals.

Not long ago, such boasts would have been dismissed as the bravado of a second-string military. No longer.

A modernization program focused on naval and missile forces has shifted the balance of power in the Pacific in ways the United States and its allies are only beginning to digest.

While China lags in projecting firepower on a global scale, it can now challenge American military supremacy in the places that matter most to it: the waters around Taiwan and in the disputed South China Sea.

That means a growing section of the Pacific Ocean — where the United States has operated unchallenged since the naval battles of World War II — is once again contested territory, with Chinese warships and aircraft regularly bumping up against those of the United States and its allies.

To prevail in these waters, according to officials and analysts who scrutinize Chinese military developments, China does not need a military that can defeat the United States outright but merely one that can make intervention in the region too costly for Washington to contemplate. Many analysts say Beijing has already achieved that goal.

To do so, it has developed “anti-access” capabilities that use radar, satellites and missiles to neutralize the decisive edge that America’s powerful aircraft carrier strike groups have enjoyed. It is also rapidly expanding its naval forces with the goal of deploying a “blue water” navy that would allow it to defend its growing interests beyond its coastal waters.

“China is now capable of controlling the South China Sea in all scenarios short of war with the United States,” the new commander of the United States Indo-Pacific Command, Adm. Philip S. Davidson, acknowledged in written remarks submitted during his Senate confirmation process in March.

He described China as a “peer competitor” gaining on the United States not by matching its forces weapon by weapon but by building critical “asymmetrical capabilities,” including with anti-ship missiles and in submarine warfare. “There is no guarantee that the United States would win a future conflict with China,” he concluded.

Last year, the Chinese Navy became the world’s largest, with more warships and submarines than the United States, and it continues to build new ships at a stunning rate. Though the American fleet remains superior qualitatively, it is spread much thinner.

“The task of building a powerful navy has never been as urgent as it is today,” President Xi Jinping declared in April as he presided over a naval procession off the southern Chinese island of Hainan that opened exercises involving 48 ships and submarines. The Ministry of National Defense said they were the largest since the People’s Republic of China was founded in 1949.

Even as the United States wages a trade war against China, Chinese warships and aircraft have picked up the pace of operations in the waters off Japan, Taiwan, and the islands, shoals and reefs it has claimed in the South China Sea over the objections of Vietnam and the Philippines.

When two American warships — the Higgins, a destroyer, and the Antietam, a cruiser — sailed within a few miles of disputed islands in the Paracels in May, Chinese vessels rushed to challenge what Beijing later denounced as “a provocative act.” China did the same to three Australian ships passing through the South China Sea in April.

Only three years ago, Mr. Xi stood beside President Barack Obama in the Rose Garden and promised not to militarize artificial islands it has built farther south in the Spratlys archipelago. Chinese officials have since acknowledged deploying missiles there, but argue that they are necessary because of American “incursions” in Chinese Waters.

When Defense Secretary Jim Mattis visited Beijing in June, Mr. Xi bluntly warned him that China would not yield “even one inch” of territory it claims as its own.




Ballistic missiles designed to strike ships on display at a military parade in Beijing in 2015.CreditPool photo by Andy Wong



‘Anti-Access/Area Denial’

China’s naval expansion began in 2000 but accelerated sharply after Mr. Xi took command in 2013. He has drastically shifted the military’s focus to naval as well as air and strategic rocket forces, while purging commanders accused of corruption and cutting the traditional land forces.

The People’s Liberation Army — the bedrock of Communist power since the revolution — has actually shrunk in order to free up resources for a more modern fighting force. Since 2015, the army has cut 300,000 enlisted soldiers and officers, paring the military to two million personnel over all, compared with 1.4 million in the United States.

While every branch of China’s armed forces lags behind the United States’ in firepower and experience, China has made significant gains in asymmetrical weaponry to blunt America’s advantages. One focus has been in what American military planners call A2/AD, for “anti-access/area denial,” or what the Chinese call “counter-intervention.”

A centerpiece of this strategy is an arsenal of high-speed ballistic missiles designed to strike moving ships. The latest versions, the DF-21D and, since 2016, the DF-26, are popularly known as “carrier killers,” since they can threaten the most powerful vessels in the American fleet long before they get close to China.

The DF-26, which made its debut in a military parade in Beijing in 2015 and was tested in the Bohai Sea last year, has a range that would allow it to menace ships and bases as far away as Guam, according to the latest Pentagon report on the Chinese military, released this month. These missiles are almost impossible to detect and intercept, and are directed at moving targets by an increasingly sophisticated Chinese network of radar and satellites.

China announced in April that the DF-26 had entered service. State television showed rocket launchers carrying 22 of them, though the number deployed now is unknown. A brigade equipped with them is reported to be based in Henan Province, in central China.

Such missiles pose a particular challenge to American commanders because neutralizing them might require an attack deep inside Chinese territory, which would be a major escalation.

The American Navy has never faced such a threat before, the Congressional Research Office warned in a report in May, adding that some analysts consider the missiles “game changing.”

The “carrier killers” have been supplemented by the deployment this year of missiles in the South China Sea. The weaponry includes the new YJ-12B anti-ship cruise missile, which puts most of the waters between the Philippines and Vietnam in range.

While all-out war between China and the United States seems unthinkable, the Chinese military is preparing for “a limited military conflict from the sea,” according to a 2013 paper in a journal called The Science of Military Strategy.

Lyle Morris, an analyst with the RAND Corporation, said that China’s deployment of missiles in the disputed Paracel and Spratly Islands “will dramatically change how the U.S. military operates” across Asia and the Pacific.

The best American response, he added, would be “to find new and innovative methods” of deploying ships outside their range. Given the longer range of the ballistic missiles, however, that is not possible “in most contingencies” the American Navy would be likely to face in Asia.





Soldiers with the People’s Liberation Army Navy patrolling Woody Island in the disputed Paracel archipelago in 2016.CreditReuters


Blue-Water Ambitions

The aircraft carrier that put to sea in April for its first trials is China’s second, but the first built domestically. It is the most prominent manifestation of a modernization project meant to propel the country into the upper tier of military powers. Only the United States, with 11 nuclear-powered carriers, operates more than one.

A third Chinese carrier is under construction in a port near Shanghai. Analysts believe China will eventually build five or six.

The Chinese military, traditionally focused on repelling a land invasion, increasingly aims to project power into the “blue waters” of the world to protect China’s expanding economic and diplomatic interests, from the Pacific to the Atlantic.

The carriers attract the most attention but China’s naval expansion has been far broader. The Chinese Navy — officially the People’s Liberation Army Navy — has built more than 100 warships and submarines in the last decade alone, more than the entire naval fleets of all but a handful of nations.

Last year, China also introduced the first of a new class of a heavy cruisers — or “super destroyers” — that, according to the American Office of Naval Intelligence, “are comparable in many respects to most modern Western warships.” Two more were launched from dry dock in Dalian in July, the state media reported.

Last year, China counted 317 warships and submarines in active service, compared with 283 in the United States Navy, which has been essentially unrivaled in the open seas since the collapse of the Soviet Union in 1991.

Unlike the Soviet Union, which drained its coffers during the Cold War arms race, military spending in China is a manageable percentage of a growing economy. Beijing’s defense budget now ranks second only to the United States: $228 billion to $610 billion, according to estimates by the Stockholm International Peace Research Institute.

The roots of China’s focus on sea power and “area denial” can be traced to what many Chinese viewed as humiliation in 1995 and 1996. When Taiwan moved to hold its first democratic elections, China fired missiles near the island, prompting President Bill Clinton to dispatch two aircraft carriers to the region.

“We avoided the sea, took it as a moat and a joyful little pond to the Middle Kingdom,” a naval analyst, Chen Guoqiang, wrote recently in the official Navy newspaper. “So not only did we lose all the advantages of the sea but also our territories became the prey of the imperialist powers.”

China’s naval buildup since then has been remarkable. In 1995, China had only three submarines. It now has nearly 60 and plans to expand to nearly 80, according to a report last month by the United States Congressional Research Service.

As it has in its civilian economy, China has bought or absorbed technologies from the rest of the world, in some cases illicitly. Much of its military hardware is of Soviet origin or modeled on antiquated Soviet designs, but with each new wave of production, analysts say, China is deploying more advanced capabilities.

China’s first aircraft carrier was originally launched by the Soviet Union in 1988 and left to rust when the nation collapsed three years later. Newly independent Ukraine sold it for $20 million to a Chinese investor who claimed it would become a floating casino, though he was really acting on behalf of Beijing, which refurbished the vessel and named it the Liaoning.

The second aircraft carrier — as yet unnamed — is largely based on the Liaoning’s designs, but is reported to have enhanced technology. In February, the China Shipbuilding Industry Corporation disclosed that it has plans to build nuclear-powered carriers, which have far greater endurance than ones that require refueling stops.

China’s military has encountered some growing pains. It is hampered by corruption, which Mr. Xi has vowed to wipe out, and a lack of combat experience. As a fighting force, it remains untested by combat.

In January, it was embarrassed when one of its most advanced submarines was detected as it neared disputed islands known as the Senkaku in Japan and the Diaoyu in China. The attack submarine should never have been spotted.

The second aircraft carrier also appears to have experienced hiccups. Its first sea trials were announced in April and then inexplicably delayed. Not long after the trials went ahead in May, the general manager of China Shipbuilding was placed under investigation for “serious violation of laws and discipline,” the official Xinhua news agency reported, without elaborating.





Fiery Cross Reef in the South China Sea. The deployment of missiles on three man-made reefs in the disputed Spratly Islands — Subi, Mischief and Fiery Cross — has prompted protests from the White House.CreditDigitalGlobe, via Getty Images


Defending Its Claims

China’s military advances have nonetheless emboldened the country’s leadership.

The state media declared the carrier Liaoning “combat ready” in the summer after it moved with six other warships through the Miyako Strait that splits Japan’s Ryukyu Islands and conducted its first flight operations in the Pacific.

The Liaoning’s battle group now routinely circles Taiwan. So do Chinese fighter jets and bombers.

China’s new J-20 stealth fighter conducted its first training mission at sea in May, while its strategic bomber, the H-6, landed for the first time on Woody Island in the Paracels. From the airfield there or from those in the Spratly Islands, the bombers could strike all of Southeast Asia.

The recent Pentagon report noted that H-6 flights in the Pacific were intended to demonstrate the ability to strike American bases in Japan and South Korea, and as far away as Guam.

“Competition is the American way of seeing it,” said Li Jie, an analyst with the Chinese Naval Research Institute in Beijing. “China is simply protecting its rights and its interests in the Pacific.”

And China’s interests are expanding.

In 2017, it opened its first overseas military base in Djibouti, on the Horn of Africa, saying that it will be used to support its participation in multinational antipiracy patrols off Somalia.

It now appears to be planning to acquire access to a network of ports and bases throughout the Indian Ocean. Though ostensibly commercial, these projects have laid the groundwork for a necklace of refueling and resupply arrangements that will “facilitate Beijing’s long-range naval operations,” according to a new report by C4ADS, a research organization in Washington.

“They soon will be able, for example, to send a squadron of ships to somewhere, say in Africa, and have all the capabilities to make a landing in force to protect Chinese assets,” said Vassily Kashin, an expert with the Institute of Far Eastern Studies of the Russian Academy of Sciences in Moscow.

The need was driven home in 2015 when Chinese warships evacuated 629 Chinese and 279 foreigners from Yemen when the country’s civil war raged in Aden, a southern port city.

One of the frigates involved in the rescue, the Linyi, was featured in a patriotic blockbuster film, “Operation Red Sea.”

“The Chinese are going to be more present,” Mr. Kashin added, “and everyone has to get used to it.”





Fighter jets on the Liaoning in the East China Sea in April.CreditAgence France-Presse — Getty Images



Olivia Mitchell Ryan and Claire Fu contributed research.


Florence’s Floodwaters Breach Defenses at Duke Energy Plant, Sending Toxic Coal Ash Into River

By Glenn Thrush and Kendra Pierre-Louis


NAVASSA, N.C. — With floodwaters continuing to rise in the wake of Hurricane Florence, state officials and environmentalists are closely monitoring the breach of a dam that has flooded a hazardous stockpile of coal ash, some of which has spilled into the Cape Fear River.

On Friday, Duke Energy shut down a power plant near Wilmington after a dam breach between 100 and 200 feet wide, at the south end of Sutton Lake, allowed floodwaters to swamp two basins containing huge stockpiles of arsenic-laced ash.

Duke’s L.V. Sutton facility has been a focus of increasing concern for environmentalists and regulators since last week, when rains from Hurricane Florence caused a coal ash landfill at the site to erode, spilling waste onto a local roadway.

Coal ash is the powdery substance that remains after burning coal. The Environmental Protection Agency links the substances that it contains — including heavy metals like arsenic and lead — to nervous-system problems, reproductive issues and cancer. 
It was not immediately clear how much ash was released. The extent of the threat will depend on how quickly the breach can be stopped, state officials said.


The state is still reeling from record-breaking flooding that has left many of the region’s roads, including a long stretch of Interstate 95 south of the Virginia border, closed to traffic.


And the danger of more flooding remains. The Cape Fear River is scheduled to crest tomorrow morning at 31.3 feet, more than seven feet above its historic flood stage. Water levels will remain high through Tuesday.

Coal ash is not the only pollutant to cause North Carolina woes in the wake of Florence. The state is home to 9.7 million pigs that produce 10 billion gallons of manure each year. Most of that manure is stored in large earthen lagoons. In the wake of Florence and the record-breaking amount of water the storm has poured onto the region, a growing number of those lagoons are flooding.

As of midday on Friday, at least 54 lagoons have discharged their waste into the environment, another 76 are at risk of doing so, and six have some form of structural damage that may have led to the release of pig feces. The number is expected to increase as more farmers return to their land. 
State inspectors, who conducted a drone survey of the area on Friday, said there appeared to be “no structural issues” with the inner containment walls, or impoundments, of the basins, according to Bridget Munger, spokeswoman for the North Carolina Department of Environmental Quality.




They are monitoring the situation in “real time” and plan to conduct an investigation into the causes of the failure once the situation has stabilized, Ms. Munger said in an email.


The dam was inspected within the last month and no major problems were discovered, state officials said.

“This is a crisis that we’re addressing but it’s in the context of a huge state emergency, so that’s just part of the big picture for us,” Ms. Munger said.

Gov. Roy Cooper of North Carolina said in a statement on Friday that “a thorough investigation of events will soon follow to ensure that Duke Energy is held responsible for any environmental impacts by their coal ash facilities.”

A spokesperson for the Environmental Protection Agency said the agency had not been out to the site, and that it would lend its support to state officials at their request.

As state officials fretted over the plant, residents and workers in the surrounding area were impatient to get back to their daily routines and were concerned about potential damage. 
“The dam really worries me. The idea that it could spill over and spread chemicals is really concerning,” said Charles Holliday, 27, who was clearing out debris from his family’s yard in the small town of Navassa, the nearest residential area to the plant. “This whole area has a lot of industrial plants and chemicals and that kind of thing. So you add it all up and, yes, it’s something we are all going to get a little panicked about.”

The river has already spread hundreds of yards beyond its banks, turning the piney flats west of Wilmington into a muddy lagoon punctured by tilting trees and half-submerged railroad bridges.


The plant itself, cordoned off by security but visible from a highway overpass, was covered by a thin pool of water, with the area closest to the lake appearing to be the most inundated.

Peter Harrison, a lawyer with Earthjustice, an environmental nonprofit, took a boat on the river to see the site himself. He said that there were multiple places where the dam around the lake had breached, and that the lake water was pouring into the river. From what he could see, he added, the lake water appeared full of coal ash.

“You can just see that swirling down the river for like miles and miles,” Mr. Harrison said.

Avner Vengosh, a professor of earth and ocean sciences at Duke University, said, “We’ll probably never know how much has spilled into the river.” Because the spill stems from large-scale flooding over a wide area, it’s difficult to calculate how much ash is entering the river.

The breach of the dam imperils two unlined coal ash ponds on site, which contain a combined 2.1 million cubic yards of coal ash, according to a report prepared for Duke Energy this year. That amount of coal ash would fill a large sports stadium.

Scrutiny of coal ash has increased since 2008, when the Kingston Fossil Plant in Harriman, Tenn., spilled 5.4 million cubic yards of coal ash into the environment. The cleanup cost more than $1 billion. 
Last week, the storm caused a coal ash landfill at the Duke plant to erode, spilling about 2,000 cubic yards of the ash onto an adjacent roadway.

The spill was quickly cleaned up, the company said. But the Waterkeeper Alliance, an environmental group, disputed that, saying at least some of the coal ash remains in the area.


In 2014 Duke Energy’s Dan River plant in Eden, N.C., spilled 39,000 tons of coal ash into the Dan River, prompting the state to order all of Duke’s coal ash ponds closed. That process is not yet complete.

In May 2015, the Justice Department announced a $102 million fine against Duke Energy after the utility pleaded guilty to nine criminal violations of the Clean Water Act at several of its North Carolina facilities.

The fine included a $68 million criminal penalty and $34 million for environmental projects and land conservation to benefit rivers and wetlands in North Carolina and Virginia. Four of the nine charges were related to the Dan River spill. The other violations were based on allegations of historical violations at the company’s other operations.

The L.V. Sutton plant now burns natural gas, but until 2013 it housed a three-unit, 575-megawatt coal-fired plant. The coal ash from that operation remains on site, with the oldest of the ash basins dating back to 1971.

The coal ash landfill at Duke’s L.V. Sutton plant, which spilled last week, was supposed to provide secure storage for the site’s two coal ash ponds, but the fact that it is already failing now has some environmental groups questioning its structural integrity.
“You know the thing with the Tennessee Valley river spill, and the same thing with the Dan River spill, a lot of that ash was never recovered,” Lisa Evans, a lawyer with Earthjustice, said. “If you spill into a lake and that lake water continues to spill into that river rapidly, you’re going to have maybe even a bigger cleanup problem.”

“If you have two million tons of ash going into that lake,” Ms. Evans added, “that lake is dead.”


Ivan Penn contributed reporting from Los Angeles.
Kendra Pierre-Louis is a reporter on the climate team. Before joining The Times in 2017, she covered science and the environment for Popular Science. @kendrawrites