Get News & Views Updates
Most Popular This Week
Popular content
Today's Top News
Climate Science and The Politics of Economic Growth
The business press worries a lot about "moral hazards." They remind us that government beneficence corrupts hard-working citizens. Social Security deters citizens from saving for retirement, unemployment insurance spares the jobless the need for diligent job searches, and health insurance encourages slothful living habits or unnecessary trips to the doctor. The business press, however, seldom scrutinizes its most revered constituents, big business.Many of our most successful and widely celebrated businesses are themselves on the dole. They take their success as proof of entitlement, and that the rest of us are suffering the consequences. The politics of global warming is a telling and consequential instance of economic power corrupting political judgment.
The latest Intergovernmental Panel on Climate Change report, which adds further support for the relationship of greenhouse gases to global climate change, has provoked an odd reaction among many business leaders. Even some who have long denied any connection between hydrocarbons and global warming now concede the link, but they take a new tack. They claim that any serious attempt to slow the pace of global warming will do serious damage to the national economy. They can reach this conclusion because they equate their short-term bottom line with "the economy," and surprisingly many in the media follow them in this judgment.
Oil industry defenders portray leading climate scientists as hell bent to place draconian curbs on the U.S. economy. Yet prominent climate scientists are, if anything, too restrained in their pronouncements. Even the most conservative introductory economics texts, like that by former chairman of Bush's Council of Economic Advisers Gregory Mankiw, recognize that markets have imperfections. When the purchase and use of a commodity harms third parties, government has an appropriate role in taxing and thus discouraging consumption of that commodity. In the world of economic textbooks, a neutral and informed government calculates the extent of the damage and enacts an appropriate tax.
Yet in our contemporary corporate economy, oil, auto, and private utility interests have enormous market power, which they eagerly translate into political power. They already enjoy vast favors in the forms of subsidized leases, government supported highways and emergency services, and lower tax rates. A tax on gas that reflected not only carbon content but much of our military cost as well as air pollution, congestion, and highway accidents would substantially impact several key corporations. Nonetheless, is their welfare synonymous with "the economy?"
Tax and regulatory policy in the late eighties and nineties led to major gains in energy efficiency and if anything were very beneficial to overall economic development. James Hansen, one of the mad scientists most reviled by leading oil companies, has put this case in language that reads as though it came straight out of market economics 101: "The U.S. is still only half as efficient in its use of energy as Western Europe, i.e., the U.S. emits twice as much CO2 to produce a unit of GNP, partly because Europe encourages efficiency by fossil fuel taxes. Available technologies would allow great improvement of energy efficiency, even in Europe. Economists agree that the potential could be achieved most effectively by a tax on carbon emissions... The tax could be revenue-neutral ... leaving government revenue unchanged; and it should be introduced gradually. The consumer who makes a special effort to save energy could gain, benefiting from the tax credit or decrease while buying less fuel; the well-to-do consumer who insisted on having three Hummers would pay for his own excesses."
Such a course of action represents a market friendly way to leverage less reliance on militarily costly foreign oil markets, less polluting and more efficient transportation system, and whole new markets in energy saving technologies.
More broadly, those who equate the economy with business as usual would do well to consider the ice storm nearly a decade ago. Recently the Toronto Star reported on a Canadian study of the storm, which also struck much of southern Ontario. The ice storm gave the biggest single boost to Ontario's economy in history, a 1.6 billion-dollar gain attributed to necessary repairs to houses, roads and bridges. If the greenhouse effect is associated with more extreme weather events, then economic growth will really take off.
Is this the kind of growth we want? GDP also rises if more citizens go to hospital emergency rooms for asthma or auto crashes. The economic growth most celebrated by the dominant players in our global economy isn't helping most of our citizens. Too many of our corporate giants feel entitled to the kind of "growth" that suits their needs. Oil and auto industry apologists argue that scientists are using greenhouse analysis to trump consumer freedoms.
Yet it is they who have used their political and economic power to narrow our options, to the detriment of today's consumers and future generations.
Comments
Note: Disqus 2012 is best viewed on an up to date browser. Click here for information. Instructions for how to sign up to comment can be viewed here. Our Comment Policy can be viewed here. Please follow the guidelines. Note to Readers: Spam Filter May Capture Legitimate Comments...
17 Comments so far
Show AllCatastrophic global warming looms. The rich/poor divide grows. Tax law changes could help. Taxes on energy make sense because the pollution is ruining our world. However, income tax on the poor and middle class makes no sense. Why discourage work? Why have property taxes on modest homes? Why discourage home ownership? Paying moderate taxes on luxury homes, estates and higher incomes makes sense to avoid increasing the economic stratification of America that damages democracy with the power of wealth. Energy taxes should be significantly raised to reflect the damage caused by each type of fuel and energy production. Sales taxes should be redirected towards luxury items, polluting devices, and inefficiency. For example, regular incandescent bulbs should be highly taxed, along with inefficient appliances and vehicles. An energy tax rebate of equal value to all adults could ease the tax burden on the poor. If we would also mandate that the pricing of electricity to each customer be based on the actual real-time demand cost and easily monitored by the consumer, we could save in multiple ways. Significant electric use could be moved to lower-demand, lower-cost times. The need for expensive new power plants that no one wants in their back yards could be reduced. With fewer plants operating, everyone could breath a bit easier. We can do better. Let's not wait too long.
this is very simple.
curb global warming (which unfortunatley, I think we have missed that opportunity)
OR there will be no more economy to worry about will there??
You know, there are more important things in life than money.
we need to remember this.
First a caution: The links provided by "Glaucus," above, are to materials created by some of the most thoroughly debunked climate change deniers out there. (e.g., the first is associated with the Oregon Institute which perpetrated a scam petition some years ago, exposed in many articles since.)
Second, "luna" is quite right. The short sighted profit perspective of big business means the corporate powers that be are happy to destroy the ecosystem as long as there are billions of dollars to be made in the process. This, despite what it means for their descendants and everyone else in the world. It is truly ecocide for a quick buck.
If we want to solve this, in addition to consumption levels and technology issues, we'll have to confront the other major factors in the equation: (a) the economic growth issue (Described well by Bill McKibben in a recent article titled "Reversal of Fortune" in Mother Jones), and (b) world population growth which UN projections have increasing by another 40% or so by 2075.
These are truly great points. We can have good types of economic growth, or bad types of economic growth. Progressives need to practice debating this issue with the capitalists in public. The capitalist plays up only the growth that benefits captial, at the expense of people. The capitalist has very little genuine credibility.
Something like 90% of economic activity is in small business. Progressives can talk to these small business people and convince them that they have a lot more in common with the people than with big business. Small business plays by the rules. Big business manipulates markets, governments and people.
So we get small businesses to boycott big business, to open up more opportunities for themselves. We simply tell them why we're doing business with them. Because we like small buinsess, not big business. They hear the news and they make their plans accordingly.
There is plenty of synergy in this approach with the overall progressive agenda. Replacing big business with small businesses builds more efficient, accountable and innovative industry.
Given that most problems in this world are the result of capitalist imperialism, let's all boycott/srike against big business and eradicate the multiple scourges simultaneously.
Two of our well worn shibboleths, got to grow the economy so as to raise people out of poverty and we've got unlimited energy, are tied at the hip as it were. As the latter idea begins to fail with declining oil production, the end of economic growth will not be far behind.
We will then come up with something more sensible than a system that has produced 3.6 billion people (and counting) living on less than $2 per day or if it takes something more local to get your attention: a system of income distribution in this country whereby the top %10 of income earners in 2005 recieved 48.5% of the income. (Don't take my word for it, see March 29 NYT article by David Cay Johnston The Income Gap is Widening.
Or else we will continue our recently
began descent into global chaos as we find increasing numbers of bad people who want to do us harm on top of "our" resources.
jon
Conneting the dots: From human behaviors to Ecosystem decline
http://StudentsForTheEarth.org
I realize John Buell has been writing for some time and I enjoy his work. The piece above barely touches some very good points, but where he could have delived some haymakers he merely darts out some tentative jabs. Rewrite the piece John and do it with more enthusiasm.
But before you do, read John Kenneth Galbraith's "Economics And The Public Purpose." Now there was a heavyweight. In that book Galbraith clearly dissects the two faces of our economic reality: the "market system" (the little guy more or less toiling in Adam Smith's vision,) and the "planning system" of corporate giants that are able in most instances to not only exploit an economic environment but also create it.
Probably ten years ago Mother Jones did another important piece in which the authors spoke of a nascent concept: natural economics. It was based on the incalculable replacement costs of things we human beings take for granted, like forests, aquifers, stable seasonable weather patterns, etc. The author mentioned, just a John did, that our economy calculates disatrous things as increments to our GNP. Strange brew. And whether we return to the Biblical flood story, or that of legendary Atlantis, there are HIGHER powers than those our mis-leaders have co-opted. These belong to the equalizing forces of Mother Nature. To the uninitiated, as per the story of Demeter and Zeus, when Demeter noted the absence of her (abducted by Pluto) daughter, she appealed to Zeus, a real bubba, kind of the CEO of Olympus. Like modern leaders today, his sexism was covert, and he could care less about bringing justice to a mother for her daughter's loss (think rape, think war, think MILLIONS of women thus impacted). So Demeter made use of her singular power: that of shutting down the harvests. SHE IS the mother of nature. I know it's not considered scientific, but look where science too often takes us (i.e. weapons) to PRESUME the connection I am about to share, yet Edgar Cayce, Sun Bear, and Yogananda (in a speech delivered to the UN in l949) have taught me to see these inter-related nuances. NATURE speaks to us. Living in Florida and bearing up to SEVEN hurricanes in the 2004-2005 season, the state (that gave the world Bush via the corrupt 2000 election debacle) suffered the effects as if it had been bombed. And since few if any could connect the cosmic dots, Mother Nature sent Katrina to our GULF as a simulation of what this nation of consumers did to a sovereign innocent people in the GULF war. Just because people get stuck in tunnel vision does not negate the higher laws. IF Bush strikes Iran, brace yourselves, my fellow citizens... karma also does its own dance of blowback, and I can almost feel the wind picking up. Although Paul Loeb wisely recommends saving pessimism for better times, only the TRUTH shall set us free. We can no longer afford past fictions.
John, a good and true article.
I presume that you raise and address the issue of "market imperfections" or 'market failures', and note very correctly that these are typically redressed by economists with tax policy, but that you avoid the more complex sounding discussion of 'negative externalities' for fear that this may be off putting to non-economists.
However, recent public reports, by Citi, Lehman and UBS, specifically dealing with precisely the issue of negative externalities have started to expose the public with this economic problem ---- and you may no longer need to be so cautious about bringing the full reality and full terminology of this massive problem to a public audience.
These major investment bank public reports, from just last month, have now opened the kimono, so to speak, on both the scale and economic terminology of this issue:
"Citigroup, Lehman Brothers, and UBS Report on Climate Risks and Opportunities for Investing
by Bill Baue
Lehman Brothers and UBS agree climate change represents a market failure for neglecting to price carbon externalizations in valuations, while Citigroup makes specific stock picks."
"The UBS and Lehman Brothers reports concur that climate change represents a classic market failure where company valuations neglect to take into account negative externalizations--in this case, predominantly the emission of carbon dioxide CO2, the primary greenhouse gas (GHG)."
"If climate change, one of the most studied environmental phenomena, represents a market failure, one can only wonder to what degree the legion of lesser-studied environmental and social externalities are not being priced into corporate valuations."
http://www.socialfunds.com/news/article.cgi/2237.html
When investment banks of this scale and prestige themselves publically admit that the historical failure to consider massive 'negative externality cost liabilities' in analyzing specific company and sector 'valuations' represents an egregious error, and that taking these 'externaltiy liabilities' into account today will drastically change their valuations of many F100 corporations (particulalry in the energy industry), then we have certainly passed the point of needing to treat this issue and the public with 'kid gloves' in addressing the deeper economic reality and terminology of 'externality cost liabilities'.
Granted, when I was debating this issue with the chief investment strategist of Deutsche Bank almost a decade ago the subject was considered a bit revolutionary and touchy, but today the validity of this problem is well understood and understood to be massive in scope.
There is no longer any need to pussy-foot around either with regard to the telling impact that this truth will have on the entire field of so-called 'growth economics', or with the fairly basic terminology of 'negative externalities' --- which have transitioned into even the public consciousness.
Like global warming itself, the issue of real vs. Ponzi economics is now understood to be beyond serious debate, and only the solutions are difficult, not the diagnosis.
"Many of our most successful and widely celebrated businesses are themselves on the dole. They take their success as proof of entitlement, and that the rest of us are suffering the consequences."
Yes, successful businesses are on the dole, or as some of us would call it, "corporate welfare". And yes, corporate welfare is an "entitlement program", though conservatives and Republicans will argue that only "social welfare" falls under the category of "entitlement programs". So, can you see where my middle finger might be pointing when I listen to this pathetic BS?
In case you have noticed over the last 6 years, Republicans and conservatives love to give welfare to those who don't need it, yet continue to attack welfare spending for citizens who actually do need it. Some of these corporate hacks have even stated that they can't find the authority in the Constitution allowing for public charity. Guess what? There's nothing in the Constitution allowing for private business charity, either.
In retrospect, I guess we're dealing with a moral issue. What would Jesus do? Would he deliver fish to a public charity or a corporate charity?
Jesus would look around and ask , Oh Lord, Oh, Lord, why have you forsaken me.
Buell is right on the money when he points out the ironies inherent in using GDP as the be-all and end-all index of economic growth. A much better index to employ would be the Human Development Index.
(http://en.wikipedia.org/wiki/Human_development_index)
Even more ironically, it appears that countries that actively foster HDI growth show higher GDP gains than countries that do not. Quoting from Wikipedia:
"Research on green taxation suggest that during the 1990s there was significant correlation between a country's UN Human Development Index (HDI) rank per fixed amount of GDP, and its level of green tax as a percentage of total tax revenues. Furthermore, over periods longer than 5 years, data suggest that countries having higher green tax rates such as Norway, Sweden and Netherlands experience higher GDP growth and higher HDI growth rate." (http://en.wikipedia.org/wiki/Pigovian_tax)
No the Lord would say, what a mess you people have made of the nice place I gave you all to share!
WmC,
Thanks for the link to the Human Development Index. I need to read that. Let me add to that the Genuine Progress Idicator (GPI) developed by the people at Rethinking Progress.
Another alternative indicator of note is Bhutans's Gross National Happiness.
While these indicators are subject to certain criticisms, they all seem to be aiming at shifting the focus to the things that really matter. And clearly, we need that.
"developed by the people at Rethinking Progress."
Oops, make that Redefining Progress.
Developers, capitalists et al, need to finally realize the economy is a wholly owned subsidiary of the environment.
No environment, no economy
Great article and discussion. Totally agree with need to factor in externalities. When a company makes a balance sheet and income statement there is a lot that never gets measured, and that's what we need to focus on. We need a more holistic approach to cost/benefit. This is the direction we need to go as a civilization - or our days are numbered.
One of my favorite quotes:
"Money is for people, people are not for money" Dalai Lama. So simple, so true.
It speaks about people but applies just as much to the envioronment. In our country, we put the All Mighty Dollar above everything, and the really weird thing is we all seem to simply accept it as a society. We need to reverse that thinking.
Also loved rtdrury's suggestion on small business. Even Adam Smith believed that the "invisible hand" would be held in check by the relationships formed within a community. Doesn't quite work when the business is a multi-national does it? The bigger the business it seems the less accountable it becomes. Buy local and support small business.
I believe there is hope - mainly because of all the folks here - articles and commenters, thank-you all.
What the markets actually fear are the emergence of any new radical technologies which could then evolve into individual liberation from the existing models of metered dependencies. To quote a market analyst who once said, "If you've got the meter running on the American people, you've got the best game in town." says it all.
Just read Margaret Cheney's book, "Tesla: Man Out of Time" and you'll discover for yourselves what happens to such great thinkers who wish to liberate the human condition, from those who seek otherwise. (By the way, No relation to the demon Cheney)
Best wishes and hope
http://www.youtube.com/watch?v=Tk1vEuhBuEU