Economic innequality and financial instability.

Economic innequality and financial instability.

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Transforming the Global Economy: Solutions for a Sustainable World

Over the past couple of months there has been a large amount of thinking and commentary on the connections between the environmental crisis and the crisis in capitalism. This isn't a discussion that i have involved myself in, but for those of us interested in dipping a toe into the discussion, a talk by Susan George would seem to be theperfect place to start.



Video thanks to Blip.tv

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Alistair Darling Goes Keynesian

The economy is weakening, should we cut back on public services? For some the answer to that is obvious, the logic is summed up nicely by the phrase 'live within your means'. For others, the picture is more complex. As the state guarantees at least a basic income for everyone it obviously docent pay for government spending to be slashed if it is only going to lead to job cuts and therefore more expenditure in terms of benefits. Job loss also causes a decline in tax revenues leading to more public sector job cuts, etc., etc.,

The alternative to this situation is increased govornment spending in weak times. This expenditure increases public debt but also strengthens the economy, fewer people loes there jobs and homes in the short term and in the long term the debt can be repaid from the tax revenues of a stronger economy.

A recent telegraph article suggests that Alistair Darling believes in this deficit expenditure, taking his academic lead from John Maynard Keynes. I suspect that this is a clear economic differentiator between the two main UK political parties.

The only question is where will this money be spent. Some of us believe that repowering our carbon fuel based energy sector, and carrying out massive energy efficiency retrofits should be high on that agenda. Housing efficiency spending makes particular sense in terms of jobs creation, cutting energy bills and fighting climate change.

UPDATE: The Governments Failure with Renewables May be Leading to the Same Conclusion

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Nature loss 'dwarfs bank crisis'

According to a new report comissioned for the European Union the global biodiversity crisis is costing vastly more than the current credit crisis.

Via the BBC:

The global economy is losing more money from the disappearance of forests than through the current banking crisis, according to an EU-commissioned study.

It puts the annual cost of forest loss at between $2 trillion and $5 trillion.

The figure comes from adding the value of the various services that forests perform, such as providing clean water and absorbing carbon dioxide.

The study, headed by a Deutsche Bank economist, parallels the Stern Review into the economics of climate change.

It has been discussed during many sessions here at the World Conservation Congress.

Download the Report:

• The Teeb Review on The Economics of Ecosystems and Biodivesrsity

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Final Garnaut Review Published

The Garnaut Review has now come to a concluded its work, back in July the 'supplementary draft' was released and now comes the final report.

The report is an Australian version of the British Stern Review. I only hope that the Australian govornment pay more attention to the letter from its author than our govornment appears to be paying to Nicholas Stern's conclusions.


The letter concludes:

Prime Minister, I have completed my task with the view that there is a solution to the diabolical problem. It is a global solution, to which Australia has much to contribute, and in the achievement of which Australia can make a difference. It is not an easy solution, for Australia or for the rest of the world. There is a chance, just a chance, that humanity will deal with this matter in a way that future generations judge to be satisfactory. So much is at stake, that it is worth a large effort to take that chance.

News Coverage:

• Sydney Morning Herald (article, comment)
  
• The Australian (article)
  
• Herland And Sun (article)

Related articles on Climate Change Action : Economics of Climate Change

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Green Jobs: The time is now?

The idea of Green Jobs or sometimes Green Collar Jobs hasn't been around for that long but is certainly making headway and is starting to become a common phrase for numerous organizations working on climate change.

Alliance For Climate Protection:

Dear Calvin,

Please join us this Saturday, September 27 for the Green Jobs Now National Day of Action. Hundreds of events will be held across the country -- free concerts, rallies, teach-ins, house parties and more -- all with the goal to spread the word: we must Repower America with green jobs now.

Worldwatch Institute:

Creating millions of green jobs: Global financial markets face increasing pressures, but a report released yesterday shows that a new green economy is emerging, creating millions of jobs in the next decades that will help tackle climate change. Whether creating clean-burning fuels, installing solar water heaters, or improving the energy efficiency of homes and offices, new jobs will form a key part of the market for environmental products and services, which is expected to reach $2.7 trillion by 2020.

The landmark study, funded and commissioned by the UN Environment Programme under a joint Green Jobs Initiative with the International Labour Office, the International Trade Union Confederation, and the International Organization of Employers, was produced by the Worldwatch Institute, with technical assistance from Cornell University's Global Labor Institute.

Renewable Energy World:
"The green economy is the mother of all economic opportunities," says Lois Quam, Head of Clean Technlogy and Renewable Energy Investments at Piper Jaffray. "This transition presents such a broad and diverse set of challenges for business, it's really remarkable to think about what needs to be done." (link)

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Jim M. Craven: The Economics of Globalisation

A facinating introduction to the world of globalisation economics. More here.



Jim M. Craven (Omahkohkiaayo i'poyi), Professor of Economics and Business Division Chair at Clark College/Vancouver, speaks at the Globalization of Homelessness and Poverty Community Lecture Series, Washington State University/Vancouver. January 27th, 2005.

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Green Jobs: An Idea Worthy of Greater Attention in the UK?

One idea that seems to be working well for the Americans is Green Collar Jobs. In a slow economic climate with well paid manufacturing jobs at a premium and outsourcing being used a a boogeyman an idea that combines big industry, economic growth and domestic production is bound to do well. My only quaestion is why have the americans come to this so soon after the seriousness of climate change has been established while us in Europe still havent found a way of broading climate friendly policies into a mainstream political force? Perhaps we can learn something from the Yanks.

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New Report by Nicholas Stern (of Stern Review fame)

Nicholas Stern has just published a new report at LSE entitled "key elements of a global deal on climate change".

Thanks to Treehugger for spreading the word about this, find the press conference here.

• Download the report.

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The Way to Go: Resolving or Addressing Externalities.

The typical view of politicians and economists in the UK, backed by many who influence policy, is that climate change is the greatest market failure ever and that we need to internalise the price of carbon. For those of you unfamiliar with the economics jargon the we say a cost is interalised when the negative environmental damage suffered by broader society is borne by a company not the broader public, and the price of the product reflects this. Throughout most of the world carbon emissions place a cost on the public but not on the company doing the polluting, or the consumer of the relevant product; the cost is external to the transaction.

Internalisation of the cost of carbon is an obvious minimum requirement to be placed on business, broader society should not bare the burden of polluting practices. However, there is a more serious critique of externalities, namely that externalities are numerous and that they are placed on the public by private enterprise. We can address many of these issues as they become politically prominent but should we not aim to resolve the problem of externalities rather than addressing them as they arise? There clearly seems to be a problem in broader economic functioning when externalities can arise. If we compare the situation to that of insurance we can consider externalities to represent damage to communal property and businesses the vandals. If the vandals are caught then they will tagged and forced to pay for any future damage. But we aren't very observant and every day that these externalities build up society is subsidising those who own business. There is a risk involved in having a society where externalities can exist, and this risk favors the wealthy.

I am concerned with questioning the narrow conversation about externalities, not with arguing for an overthrow of capitalism whatever that may be. In fact, my conviction that externalities are more than a problem to be addressed one by one stems from the failure of state socialism.

Stalin may have asked for a quantity of carpet. A million square meters at first. He would in all likelihood have then been informed that a million square meters of carpet as thin as a cloth had been produced. Perhaps a request for carpet by the tone wold have then been given, of course now the exact opposite would be likely, a carpet so thick that the best palaces would envy its luxuriance . Perhaps a thickness would have then been defined, only to result in a perfect thickness with the poorest thread, did anyone ask for good thread? This kind of story is often told as an explanation for why markets are preferable for allocating economic resources. If the weaver had to sell the product people would simply pick the carpet that best met there needs.

I see parallels between a command economy, and the creation of markets that are prescribed as a means of internalizing costs. Commodifying soil , water and air to reduce pollution is a deconstructionist and arbitrary process on a planet with intimately interwoven systems.

It seems to me that we have a political problem. Consideration of who is making the important decisions is the means by witch we will solve our problems. Emphasis on involving local communities in projects and good science in policy discussions are two small moves towards resolving the issue of --not addressing the consequences arriving from--externalities

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UK Budget 2008: Green or just taxing?

The 2008 Budget is out tomorrow and the prospects of green tax hikes are about as popular with the right as they are with me. The problem seems to be that the government cant stand raising the main taxes so they go after alternative revenue streams from a variety of sources. This is quite a contrast to the idea of keeping the budget under control and then reshaping it to reflect priorities. If the government cynically exploit the label green then they will damage the true idea in the process.

Some good green taxes would include:

• A tax on aviation fuel, putting it in line with petrol, the hypothication of this towards our rail services would make it a real green tax.
• An across the board carbon tax at the level of fuel purchase. Reductions in council tax or the rate for the lowest income tax band would make this a popular scheme.
• A differentiation of vehicle excise duty (VED) so that those with highest mileage are free and those with the lowest mileage are really expensive range £0-3000 per year.
• A vehicle sales charge on polluting vehicles, the revenue from which is used to subsidies less polluting vehicles.

Some measures deal with green issues without tax:

• A free energy audit and installation of draft stripping, insulation and other air tightness measures. Offered as an alternative to winter fuel payments which require funding every year due to poor building stock.
• No new roads. Funding for roads diverted to cycling, walking and public transport schemes.

What do the papers have to say?

The Telegraph states that the widely anticipated rise if fuel tax may not materialise due to high oil prices.

"Alistair Darling does want to send out a signal that fuel use needs to be cut
and people have to pay for the environmental damage. However, previous fuel duty
rises have been delayed."

The Guardian points out that a forecourt fee is likely to be introduced for the most polluting vehicles.

"The chancellor will present a report on "decarbonising road transport" prepared
for the Treasury by Professor Julia King which recommends measures such as a
"showroom tax" on the most gas-guzzling cars to discourage consumers from buying
them. The £2,000 figure being speculated on at the weekend is thought to be on
the high side, however."

The Daily Mail points out in a surprisingly sane and analytical article that the charge for gas-guzzlers will apply to band G vehicles. I would be interested in the average cost of a band G vehicle and how a relatively small charge will effect purchases. It is also noted that a tax break for clean cars is expected. A tax on aviation based on flights not people is expected; this tweak acts as a motivator to full planes.

"Buyers of new 'gas-guzzlers' in car tax band G - including Range Rovers and
other 4x4s - will be hit with a first-year charge of more than £1,000 in vehicle
excise tax, before it reverts to the current level of £400. Drivers with green
cars will see their tax bill fall."

New aviation taxes will encourage fuller flights and we could well see green
rules covering the sale of commercial property.

The Daily Record points out that Darling is likely to get publicity by announcing significant increases in winter fuel allowances: an awful move people need warmth not fuel.

The Tories say he will unveil a headline-grabbing rise in the winter fuel
allowance for pensioners.

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Paul Krugman: The Conscience of A Liberal

Princeton University Professor and NYT columnist Paul Krugman speaks about the end of the New Deal post-war consensus and the rise of a new Gilded Age.

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Cap and Trade, Green Tax Switch, Ineqaulity and International Climate Funds.

A short time back i was asked to contribute one simple policy to a website called 'day one' that is seeking to concentrate suggestions for day one of the next US presidency.

My suggestion was:

"I suggested taxing pollution more and income less. Income tax would be
reduced most at the lower levels of income to overcome the regressive nature of a carbon tax. This 'green tax switch'is one no brainer that every country
should adopt in combination with other measures."

After all my recent reading and video watching on ineqaulity recently I think it's fair to say that i would go beyond simply balancing the regressive nature of a carbon tax with the progressive nature of income tax cuts for the poor. I would create a dramatically progresive system to counterbalance both structural economic feature disadvantaging the poor and the current tax system that steals from the poor to give to the rich.

I would like to thank Christopher Mitchel for passing on this link to me. The New Rules Project sketches out a cap and trade scheme based on an auction of permits with the revenues being recycled into the economy as suggested be me for a carbon tax.




It really dosent matter to me if this scheme is followed or a carbon tax approach is used for funding tax cuts for the poor. What i would say is that both a carbon tax and a cap and trade scheme are needed, and one of them will need to fund projects agreed on internationally. Adaptation and clean development in the global south require significant revenues. Politicians have proven appauling at looking through their domestic budgets and finding a little slack so they can fullfil their international responsibilities. However the EU ETS and some US cap and trade schemes are considering a hypothication of auction revenues for international commitments. I think that this is sensible and that as cap and trade systems are likely to all function under a post-kyoto framework it seems logical if not absolutely nessicary that they provide the funds and that a revenues neutral but progresive carbon tax recycling schemes can be a purely national matter.

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Economic Inequality in the USA

Continuing my investingation of economic ineqaulity I found this video investingating the Bush tax cuts. Ineqaulity of some degree is nessicary but currently things are getting out of hand in the UK and US.

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Getting serious about people to protect the planet.

John Schmitt gives a facinating talk on changes in income and wealth ineqaulity in the US since the second world war.

I seem to be following US economic policy more closely that that in the UK as materials are better available. The US may now be in a recssion but even before this period Americans didn't feel as wealthy as national economic growth suggests that they should. Why arent Americans feeling welathier?




The answer comes down to distribution of income. In perticular the establishment
of govornment policies that actively shift power to the wealthiest 5% and even more
so to the wealthiest 1% of the population. It is a great irony that in the early 80's when the post-war boom had subsided the presumed saviour of the economy Ronald Ragan was voted into office. Ragan presided over an economy growing steadily, whilst at the same time singularly failing to pass on this growth to the vast majority of the population. So whilst the economy has grown from 100 units to 167 units per capita the feeling is very different:

"We are a very much richer country now than we where 25-30 years ago. And i think one of the great ideological victories of the rights is to persuade us somehow that we dont have the resources or the abillity to be able to afford the things that we used to do...that we cant afford the education, or the social security sysem...and i think that is an incredible misrepresnetation of the economic situation on the united states."

US GDP was 100 uits in 1979 and 167 in 2004. The image bellow shows the wage growth at 10th, 50th and 95th percentile. Wages have decreased slightly for the poorest, risen about 10% for the median and about 30% for the top 10%: despite 60% growth in wealth!

All of these figuers are however poor when compared to growth in GDP...the full increase in wealth reaches the top eschelons not through wages but through invesments. Govornment policies are effectively robbing from the poor and giving to the rich (but subtly). The graph bellow shows how the wealth gains from 1983 to 2001 have been distributed. And it is this economic policy that the Republicans are falling over each other to associate themselves with! The democrats also had a role in this and they have done very little to show that they have seen the light and are prepared to do something about this appaling state of affairs and move the US away from its position as most ineqaul developed nation.

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Inequality: seeing is believing.

My latest interest is economic inequality. A natural next step after reading Herman Daly and his take 
on ecological economics and the need for a steady state economy; in a steady state economy great wealth for a few actually represents impovrishment of the poor. Even without a steady state economy the image bellow forces us to ask some significant questions...

This image is a visual metaphor displayed graphically, the metaphor is here.

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Problems with GDP: Joseph Stiglitz at the Asia Society

Joseph Stiglitz, author of 'Globalisation and It's Discontents' spoke recently (full talk)at the Asia Society in New York City.

In the short excerpt bellow some of the problems with GDP are discussed, along with a facinating anicdote about how special interests have worked to protect this measure...because it is defective.

Nobel Prize-winning economist Joseph Stiglitz ("Globalization and Its Discontents") talks about his new concept of economics, "The Economics of Information," and his latest book, "Making Globalization Work" - Asia Society

Joseph Stiglitz was chief economist at the World Bank until January 2000. Before that he was the chairman of President Clinton's Council of Economic Advisers. He was awarded the Nobel Prize in economics in 2001. He is currently a finance and economics professor at Columbia University. He is the author of Globalization and Its Discontents and The Roaring Nineties.

Related:

• All Climate Change Action posts on Economics.
• Herman Daly on Ecological Economics.

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Inneqaulity in the US.

Economics is flawed, at least as currently practiced. Currently markets are used quite effectively to carry out the key function of resource distribution. States cannot do this, as the Soviets so convincingly illustrated. However, distribution of economic resources is not the only problem that we need to solve.

If you are a traditional economist then the two areas of concern are:

• Distribution of resources efficiently. (this gets all the atention at present)
• Allocation of wealth. (Ineqaulity in excess leads to low economic productivity)

If you are an ecological economist then these two issues are joined by a third

• Scale. (if the physical limits of the planet are to be considered there is an optimum scale for the economy; with a given distribution and allocation pattern a variety of standards of life are possible depending on scale)

This is best explained by means of an analogy:

Boat's have a plimsol line. You can add goods to the vessel untill the water reaches this level. If you are careful and distribute the goods evenly over the vessel you may carry more than if the weight is to one side. The weight is analagous to the economic activity, the boat our planets carrying capacity and the distribution is the perfect distribution of resources in the economy.

We can stretch this analogy further to cover inneqaulity. It is well known that a unit of wealth for very poor is more productive than for the wealthy. If you give a poor farmer $500 dollars he may be able to transform his livelihood, the same can not be said for a millionaire. So if we imagine not a deck with goods to be sifted around but a series of decks where goods on the higher decks represent the wealthy we can see that this to destabilises our boat. The higher the centre of gravity the more the boat rocks, even if the load is even and not great the plimsol line will be diping into the water and tising far above.

When dealing with envieronmental issues we must embrace economics. We must say, what a facinating system, let us set it a new challange. Having largely solved distribution let us then look at scale and allocation. We must fight inneqaulity and population growth as we promote innovation and eco-efficiency.

All of this is important not only in terms of comming to grips with communal challanges but also in terms of getting such a movement off the ground. Ineqaulity has many associated malodies, it does not emerge out of thin air and the related social issues of insecurity and lack of trust are certain to promote reactionary, defencive politics not a generous progressive agenda.

The video bellow covers the current economic state of play in the US.

Panel discussants:

Alan Krueger, the Bendheim Professor of Economics and Public Policy and Director of the Survey Research Center at the Woodrow Wilson School;

Douglas Massey, the Henry G. Bryant Professor of Sociology and Public Affairs at the School;

Viviana Zelizer, the Lloyd Cotsen '50 Professor of Sociology at Princeton.

Moderator:

Stan Katz, Lecturer with rank of Professor of Public and International Affairs
Faculty Chair, Undergraduate Program

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Sex, Lies, and Reformist Economic Concepts

Their is not much multi-media content online about Herman Daly. That's a shame as he has a lot of important ideas. However i have just found a talk that covers
some of Daly's ideas.

Thomas Prugh, State of the World 2008 co-director, Worldwatch Institute, introduces (MP3) the fundamental principles of sustainable economies and outlines a roadmap for achieving them.

Related:
Blog posts on economics (including sustainability).
Post on Herman Daly.
Me talking on sustainability (1, 2) (before reading Beyond Growth and Limits of Growth).

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Ministers ordered to assess climate cost of all decisions.

A positive development in UK govornment climate policy, a shadow price on carbon for policy decisions.

The "shadow price for carbon", representing the cost to society of the environmental damage, has already been agreed for every year up to 2050 by government economists. It will be set at £25.50 a carbon tonne for 2007, rising annually to £59.60 a tonne by 2050.

The climate change minister, Phil Woolas, said: "This will have huge implications for [the] government. If for instance a new power station is due to cost £1bn, but it will add £200m worth of carbon emissions, we will decide that the cost of the power station is £1.2bn, even though its cash price is £1bn. We are creating a new currency."

Via the Guardian.

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