Climate Change

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Marx, ecology and industrial agriculture

Published by Anonymous (not verified) on Tue, 26/05/2020 - 6:22pm in

British climate activist and socialist Martin Empson writes on why the fight against climate change must be a fight for system change and for socialism

This year should have been a year of mass climate protest. Australian activists will need no reminding that the year began with appalling bushfires; fires that symbolised the inability of neo-liberal governments to deal with the climate crisis. But those fires weren’t the only symptom of a deepening crisis—in the same period we saw floods in Jakarta and the UK and these followed a year of environmental disaster.

The coronavirus pandemic has, at least in mainstream media and political thought, dominated everything else driving climate change from the headlines. Yet despite hopes by some environmentalists that the lockdowns would lead to significant cuts in pollution, it looks like total emissions will only decrease by 5 per cent in 2020. Reduced air pollution in cities is enjoyable, but has little to do with wider emissions caused by capitalism’s addiction to fossil fuels.

Here in the UK we were building towards mass protests at the United Nations climate COP talks in Glasgow in November, involving mobilisations by trade unionists, climate strikes, Extinction Rebellion, NGOs and many other activists. Those talks have now been postponed, but the crisis has not gone away.

In April a team of scientists reported that in 2019 the Greenland Ice Cap had melted at an alarming rate. In July last year, Greenland lost 197 gigatonnes of ice. One of the team, Dr Xavier Fettweis was quoted in The Guardian on the study, “This melt event is a good alarm signal that we urgently need to change our way of living to hold [back] global warming because it is likely that the IPCC projections could be too optimistic for [the] Arctic”.

Dr. Fettweis was right to link the crisis with wider questions of how we live our lives. Both the climate and coronavirus crises have their origins in capitalist society, which sees the natural world only in terms of its benefits to economic production.

Capitalism, as Karl Marx explained, is a system of generalised commodity production based on the desire to make profits at all costs. This need to accumulate wealth by companies and multinationals in constant competition with each other means that all other considerations get ignored. The bosses drive workers harder to maximise profit, but they also destroy the natural world in the process. Marx wrote:

Capitalist production… disturbs the metabolic interaction between man and the earth… All progress in capitalist agriculture is a progress in the art, not only of robbing the worker, but of robbing the soil… Capitalist production… develops the technique and the degree of combination of the social process of production by simultaneously undermining the original sources of all wealth—the soil and the worker.

All human societies have an ongoing metabolic interaction with the natural world. For survival, people need water, food and shelter and we satisfy these needs through collective social organisation.

Throughout history, we have had many varied ways of organising our societies, hunter-gathering, feudal societies and so on. In all of these societies, human labour appropriated nature in the interest of satisfying our needs. However, what is key is how that labour is organised. Because humans have changed nature throughout history, all societies have the potential for that change to be ultimately detrimental upon ourselves. Ancient Greek and Roman deforestation caused the silting up of rivers for example.

COVID-19 likely originated from animals before making the jump to humans. This process also happened in the distant past. The first domestication of animals took place around 30,000 years ago and once our ancestors began living in close proximity to animals, there was the possibility for diseases to spread to humans, a process that scientists call zoonosis. Diseases like TB, diphtheria, measles, mumps all made this jump in the past.

However, capitalism qualitatively and quantitatively transforms the process of zoonosis and environmental destruction because of the way it relates to nature.

Key to understanding emergent diseases is the role of industrial agriculture. This is an environmentally destructive, highly intensive method of farming that is predicated on the need to maximise profits rather than feed people. Dependent on vast quantities of inputs like pesticides, fertiliser and fossil fuels, industrial farming utilises monocultures of crops and animals and creates the conditions for diseases to spread and ecologies to be destroyed.

Capitalism further encourages the spread of disease because it causes poverty, inequality and refuses access to healthcare. Friedrich Engels, writing about the living conditions of workers in Britain in 1872, noted that once disease began to affect the rich, as well as the poor, they began to do something. But, despite improvements, the problems kept reoccurring, because the basis of the system remained the same:

Government commissions were appointed to inquire into the hygienic conditions of the working class. Their reports… provided the basis for new, more or less thoroughgoing laws. Imperfect as these laws are, they are still infinitely superior to everything that has been done in this direction up to the present on the Continent. Nevertheless, the capitalist order of society reproduces again and again the evils to be remedied, and does so with such inevitable necessity that even in England the remedying of them has hardly advanced a single step.

The Marxist evolutionary biologist Rob Wallace shows in his book Big Farms make Big Flu the various ways industrial farming leads to the spread of disease. But he is also clear that this is the consequence of the drive to impose such forms of farming through neo-liberal processes. US agribusiness in particular, in collusion with the US state, worked to impose industrial farming on the rest of the world through the 20th and into the 21st century.

One consequence of this is the destruction of traditional farming practices in a process very similar to those that took place in Europe with the arrival of capitalism.

Marx developed his understanding of capitalism’s ecological destructiveness through his investigations into the nature of capitalist farming. He drew heavily on the work of scientists like Justus von Liebig who showed how intensive farming, which produced food for the cities, led to a systematic destruction of soil fertility in the countryside.

The crops brought to urban areas grew by using nutrients from the rural soil. The loss of these nutrients undermined longer-term fertility.

The only way to restore fertility was with the systematic application of external chemicals—fertiliser from bird guano, or even human bones from Napoleonic battlefields. Later the development of chemical fertilisers and pesticides allowed the restoration of the soil through technological inputs, but this produced their own cost to the environment.

Examining agriculture, and extending this analysis, Marx wrote that capitalist production created an “irreparable rift in the interdependent process of social metabolism”. This “metabolic rift” between nature and society is inherent to capitalism.

Capitalism required a break with previous societies. In England the development of capitalism saw the systematic destruction of historic methods of agriculture—the enclosure of fields, the forcible eviction of the peasantry and the breaking up of old social and economic rural relations. The essentially local system of production left over from feudalism was broken up to create a capitalist agricultural system that functioned for profit.

The metabolic rift in agriculture arose because it was more profitable to strip the soil bare in producing crops for the cities. In the process, the peasantry was transformed into agricultural wage labourers, or forced into the newly industrialising cities.

While Marx and Engels did not know about global climate change, they did understand that capitalism would lead to serious environmental crisis. Marx argued that if we could rationally manage our relationship with nature, we could build a sustainable world. As he wrote:

From the standpoint of a higher economic form of society, private ownership of the globe by single individuals will appear quite as absurd as private ownership of one man by another. Even a whole society, a nation, or even all simultaneously existing societies taken together, are not the owners of the globe. They are only its possessors, its usufructuaries, and, like boni patres familias [Good Heads of Household], they must hand it down to succeeding generations in an improved condition.

So the struggle to stop environmental destruction is simultaneously a struggle against capitalism and for socialism. This is not to say that socialists say to climate activists “wait for the revolution”. Rather we must develop the sort of movements that can fight ecological degradation today—against the expansion of mining or the building of pipelines, in favour of renewable energy and low carbon public transport. But we also must argue that these movements have to challenge capital itself.

In her most recent book On Fire, Naomi Klein argues that the success of movements fighting for the Green New Deal will depend on their ability to involve ordinary working people because as well as challenging the bosses over environmental issues, we are also linking them to wider social issues—racism, imperialism, poverty and inequality. We need to argue for a Just Transition that does not leave workers behind, but utilises their skills in decent, well-paid jobs that improve the environment.

These movements must also develop into a challenge to the capitalist system. Today many people in the environmental movement demand, “System Change not Climate Change”. That means that many people recognise that capitalism is the problem. But what to replace it with? Here socialists can pose a concrete alternative. A vision of a society where ordinary people, through the democratic institutions they have built from the bottom up, organise and control production. It is only by finally destroying capitalism and building a new socialist society that we can build a world were people’s health and environment comes before to the wealth and luxury of a tiny minority.

Martin Empson is the author of Land and Labour: Marxism, Ecology and Human History (2014), ‘Kill all the Gentlemen’: Class struggle and Change in the English Countryside (2018) and editor of System Change not Climate Change: A Revolutionary Response to Environmental Crisis (2019). He is a member of the Socialist Workers Party in Britain.

The post Marx, ecology and industrial agriculture appeared first on Solidarity Online.

‘Two roads diverged in a yellow wood’. The question is which one will we take?

Man standing in a wood at a fork where paths divergePhoto by Vladislav Babienko on Unsplash

Two roads diverged in a yellow wood’ are the opening words of a poem by the celebrated poet Robert Frost. Whilst he was writing about his own personal life’s journey, they are words that could not be more appropriate to the situation that not just the UK, but the planet, finds itself in. The COVID-19 pandemic which has brought world economies to a standstill and threatens a deep recession is uppermost in our minds, particularly those people who have been directly affected by the disease or by loss of their employment. But those immediate threats, devastating enough as they are proving to be with no immediate solutions and a government anxious to get the economy going again regardless of the potential human consequences, are overshadowed by another peril. Climate change remains the biggest challenge of all, risking as it does the very survival of the planet’s ecosystems and by implication human existence.

Our daily routines have until now imposed a false sense of permanence. The illusion that despite the cyclical economic instability which capitalist societies are prone to, everything always, eventually, returns to ‘normal’. Even when normal has patently shifted. We have accepted this as part and parcel of how things are, even when it hurts people. But the severity of the pandemic is challenging that view. We are finding that in addition to the risky nature of life which COVID-19 has revealed, danger also comes from the fact that our economic system has been built on shaky ground indeed – one might say quicksand. The rolling death toll and the degradation of our public services is a daily reminder.

As the country moves towards a lifting of lockdown and a return to semi-normality, we are seeing more cars on the road, beaches crowded with day-trippers, people travelling hundreds of miles to visit beauty spots, the prospect of schools re-opening amidst huge controversy and airlines proposing to recommence flights, the question hangs in the air about what sort of future lies ahead. Whether we can indeed continue along the perilous path of growth we have been travelling along without some sort of future reckoning. And if not, what should our world look like?

COVID-19 and its associated threats have revealed in the starkest way possible that the economic system which prevailed for the last forty years and more has left the world unable to meet the challenges so cruelly posed by the pandemic. All as a result of a toxic neoliberal ideology which has left our public and social infrastructure in ruins, impoverished people as a direct consequence of a globalised world which has kept wages and living standards down and focused on the primacy of the individual over collective action. Politicians have listened to the so-called economic gurus and put their faith in a mystical market as if somehow it alone can direct the orchestra from the celestial podium. Letting it rip to find that non-existent perfect equilibrium by serving global corporations through legislative means, promoting the lie of trickle-down, and claiming that the public infrastructure depends on so-called ‘wealth creators’.

We have paid a heavy price and we are indeed at a fork in the road. Where we go from here is not clear. And yet the choices we make next will make all the difference.

Earlier this week, the President of the World Bank said that ‘the pandemic and shutdown of advanced economies could push as many as 60 million people into extreme poverty’. The Chancellor of the Exchequer in the same week warned that Britain was facing a ‘severe recession the likes of which we haven’t seen’ which would cause severe damage to the UK’s economy. He also went back on earlier predictions of an ‘immediate bounce back’ as the lockdown was lifted and said that there would be more hardship to come.

This came as the Treasury confirmed that around eight million UK workers have now been furloughed and two million are expected to receive support from the government. The government’s spending has risen massively to support those affected and keep businesses ticking over until such time as a recovery is underway.

Although there has been some talk of more austerity to pay for this spending, even the most hawkish of commentators from neoliberal institutions like the Adam Smith Institute recognise that the last thing we need now is to worsen the prospect of a full-scale depression, even if those observations are still couched in household budget terms. Borrowing whilst interest rates are low or growing the economy to improve tax revenues are the oft-repeated caveats to that spending. Clearly, this is not closing the door to such false household budget narratives.

It is politically expedient to accept the need for spending to stop the economy from collapsing and causing infinite damage to the business infrastructure and profits much as the Labour government did in 2008 when it bailed out the banks. But in time, those narratives will likely be given a fresh breath of life at least in terms of continuing to deliver a political agenda.

It will likely bring the next instalment of austerity for public services and their employees’ wages and carrying on along the well-trodden path which favours corporations by delivering a legislative framework not just at national level but international level through the pursuit of free trade deals.

The state with its power of the public purse being used, not for the public purpose, but for quite a different estate – the corporations and a few wealthy elites. Indeed, this week the media, economists, politicians and political commentators have been priming the public for the acceptance of more austerity by reinforcing the message that governments have to borrow or that government has to collect money from tax revenue or other charges before it can spend.

Both the Huffington Post and the BBC ran articles this week discussing how governments pay for the government’s increase in spending through bond issuance. Peter Hitchens tweeted that Rishi Sunak’s furlough billions were just giant payday loan that the country will have to pay back with interest (at some future date). And Boris Johnson when challenged about the decision to continue charging health and care workers to use the NHS (before the decision to rescind the charge) suggested that the money was needed to run the NHS. Indeed, Captain Tom has been knighted for his work in raising money for the NHS as if the institution was a charity and not a publicly funded organisation which does not require tax or other contributions to fund it.

The narrative being reinforced in in the public’s mind is that at some time down the track it will all have to be paid for through more austerity or increased tax. It is worth repeating here that a sovereign currency-issuing government does not need to borrow in order to spend. Indeed, logically speaking how could it borrow money unless it had been spent by the government first? What looks like borrowing isn’t and bond issuance has quite another role. It is instead a smoke and mirrors exercise designed to give the appearance of borrowing and continue the narrative that governments are beholden to money lenders in private markets or that the markets call the tunes.

Dispelling the myths about how governments spend is a priority if we are to give ourselves half a chance to make a different and better world. As was indicated at the beginning of this blog COVID-19 and recession are just part of this picture. The talk about ‘getting back to normal’ overshadows the biggest threat that we still face – climate change and what our response should be. The false narrative of the burden of debt and paying it back will, if allowed to persist, persuade people that action to deal with any of those threats whether unemployment caused by a COVID-19 induced recession or climate change is unaffordable in the long term. That there is always a financial price to pay.

The reality is that the price will not be monetary, it will be in the lives of people who are unemployed, and a trashed planet not fit to live on. We will be rulers of a dead planet, poisoned by our own hand.

There is an alternative. It starts with knowing about how money works and being able to challenge the current narrative that success is to be judged by how well our politicians managed the public accounts.

Contrary to Mrs Thatcher’s oft-repeated slogan ‘there is no alternative’; there is one.

This is the moment to think about a permanent Job Guarantee to manage both the catastrophic effects of COVID-19 on people’s lives and the economy in terms of stabilising it through ending involuntary unemployment and facilitating the transition towards a green and sustainable world. So much potential but will our government act?

Maybe that time is coming; only time will tell. The political discourse has so far been dedicated to a return to normality, growth and rising GDP.

Fiona Harvey, the environment correspondent in the Guardian began an article this week with a stark warning:

‘Global leaders must heed the lessons of the financial crisis of 2008 when they look to repair the damage from the coronavirus pandemic, leading experts have warned, to avoid entrenching disastrous social, health and environmental inequalities and hastening climate breakdown.

The stakes are high.

Earlier this month the Oxford Smith School of Enterprise and the Environment published its paper ‘Will COVID-19 fiscal recovery packages accelerate or retard progress on climate change?

In its introduction, it noted that the crisis had demonstrated that governments can intervene decisively once the scale of an emergency is clear and public support is present. It went on to say that:

‘The climate emergency is like the COVID-19 emergency, just in slow motion and much graver. Both involve market failures, externalities, international cooperation, complex science, questions of system resilience, political leadership, and action that hinges on public support. Decisive state interventions are also required to stabilise the climate, by tipping energy and industrial systems towards newer, cleaner, and ultimately cheaper modes of production that become impossible to outcompete’

Its recommendations for contributing to achieving economic and climate goals were:

  • clean physical infrastructure investment
  • building efficiency retrofits
  • investment in education and training to address immediate unemployment from COVID-19 and structural unemployment from decarbonisation, — natural capital investment for ecosystem resilience and regeneration
  • clean R&D investment.

A state-run Job Guarantee implemented to serve both national and local community objectives offers the perfect vehicle to deliver a green-led recovery and reduce the inequality of past decades. Retrofitting existing buildings, creating cities which are cyclist and pedestrian-friendly, digging trenches for broadband connections, planting trees or putting in networks for charging electric-powered vehicles are just a few examples of the work that Job Guarantee participants could accomplish. Our imagination can determine the rest. Serving the public purpose must be the quest.

A Job Guarantee provides an immediate solution to the problem of rising unemployment to stabilise the economy, an opportunity for training the workforce and, out of the catastrophe of pandemic, also provides the perfect opportunity to start along the path towards a more equitable, greener and sustainable world.

We as a nation may also want to consider what sort of future we want in terms of public infrastructure to serve the public purpose. Do we want more state provision – a publicly provided and paid for infrastructure and employment to ensure that we can meet whatever the future holds? If the current situation is anything to go by, there are lessons to be learnt. Or do we prefer to continue as we are and move into a Mad Max dystopian type world where corporate profit is the guiding light and government is its servant?

Brian O’Callaghan, a co-author of the paper said that it was ‘this is the single biggest opportunity for the government to shape the future decade…’ which indeed it is.

Robert Frost ended his poem:

‘Two roads diverged in a wood, and I —

I took the one less traveled by,

And that has made all the difference.’

Therein lies the challenge. Not directly a personal one in this case but one which involves us all. Do we continue as we are or choose another path for the sake of the future and those that will inherit it?

 

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The post ‘Two roads diverged in a yellow wood’. The question is which one will we take? appeared first on The Gower Initiative for Modern Money Studies.

A Post-COVID Vision: The Full and Sustainable Employment Act

By Brian Czech

If COVID-19 has taught us anything, it is that the Great God of GDP is a false god after all, impotent as Baal. The mighty American economy, with unprecedented GDP, has been knocked to its knees by one of the lowest conceivable life forms, a mere virus possessing not a single strand of DNA. Politicians who thought their legacies would be associated with “the greatest economy ever” now look like ridiculous priests of a sham religion.

GDP exceeding $21 trillion in 2019 ($87 trillion globally) has been powerless to cure the sickness, financial trauma, and fear experienced by millions of Americans and billions of souls worldwide. Adapting to the new reality of a COVID-infected world and the uncertain hope for a vaccine is depressing in the best of scenarios and devastating in the worst. Yet adapt we must, and that includes public policy as much as individual behavior.

Coronavirus briefing. We need a Full and Sustainable Employment Act.

Pushing for growth vs. protecting the public: COVID-19 as the latest episode. (Image: CC0, Credit: The White House)

The CDC, NIH, and WHO have provided recommendations for lowering the spread of the virus and helping infected patients survive. Politicians are attempting to balance such recommendations with the concern for a healthy economy. The problem is that virtually every major politician in the USA, as well as a majority of politicians in the world, think of economic health in terms of GDP growth. For that matter, so do the economists advising these politicians and appearing on mainstream media. Their “adaptation” to the COVID-caused recession is nothing more than a hapless attempt to get back to business as usual; that is, growing the GDP through fiscal and monetary “stimulus.” In other words, it’s no adaptation at all!

Common sense and a pair of eyes is enough to recognize that the need for social distancing—effective adaptation to COVID-19 at the individual level—translates into lower levels of economic activity and a lower velocity of money. Unfortunately, politicians are now handling public health as they handled environmental protection for decades, acting as if we can have our cake and eat it too. They seem to think that, with enough Plexiglas panels on factory floors and retail counters, we can stimulate the economy back into $21-trillion territory without suffering a pandemic death toll. We can expect claims of “there is no conflict between growing the economy and protecting public health,” echoing the decades-old mantra that “there is no conflict between growing the economy and protecting the environment.”

Will we be fooled again by the win-win rhetoric? I don’t think so—at least not nearly so many of us—because this time the threat of the growth obsession is a direct, imminent matter of life or death. As employees are prematurely pressured to return to work “for the economy,” knowing fully well that doing so increases their odds of contracting the deadly virus, surely they will rethink what “the economy” is really for and who is behind the push to “stimulate” it.

There will be a significant percentage of individuals who decide more or less happily never to return to the jobs that dominated their life pre-COVID. Many will wrestle with trade-offs, such as extra gardening and more childcare, and certainly less luxury goods and entertainment. Some will have saved enough—and were cautious enough to avoid debt traps—such that they may find the new lifestyle to be empowering and even more joyful than the old 9-to-5 grind. They won’t be contributing much to GDP, but they’ll be healthier and happier, and will hardly be a burden on the nation’s infrastructure and budget.

Unfortunately, many others will be desperate to return to work or find a new job. They may have little means of subsistence—no lawn for a victory garden—and some will be threatened with homelessness when they can’t pay the rent. Even they, however, will see through the lie that “there is no conflict between growing the economy and protecting the public from COVID-19.” They are victims of an unfair capitalist system who must go to work “for the economy” and risk their health in the process.

The experience of individuals far and wide, then, will be conducive to a sea-change in attitudes toward the economy, GDP growth, and the government’s role in defending its own taxpaying citizens.

A New Economic Policy for 21st Century America

A new policy vision for the post-COVID economy entails replacing the current policy. So, what exactly is the current policy? What is it that steers us constantly, relentlessly back onto the GDP growth path? Let’s take a short trip down institutional memory lane…

Harry Truman and the Full and Sustainable Employment Act

President Harry Truman signed the Employment Act in 1946; a first step in the formal pursuit of GDP growth. (Image: CC0, Credit: Abbie Rowe)

As a response to the Great Depression, Franklin Delano Roosevelt gave Americans the New Deal. Most of the work programs were cultural successes and employed significant numbers of young men. Yet the Depression wasn’t “solved” until World War II, with the mobilization of the civilian labor force and technological progress spinning out of war-time laboratories. Most Americans know this basic story of the Great Depression, New Deal, and World War II, but few seem aware of the Employment Act of 1946. We must be fully aware of it to move toward a new economic policy for the 21st century.

The Employment Act was a Keynesian adaptation to the experience of the Great Depression; that is, it was largely a result of John Maynard Keynes’ General Theory of Employment, Interest, and Money. Prior to Keynes, economists clung stubbornly to their ideal of laissez faire (let do; non-interference) as the proper governmental approach to economic affairs. General Theory was the paradigm-shifting book that persuaded Western governments to take active fiscal and monetary measures for ensuring adequate demand for goods and full employment of the labor force.

In crafting the Employment Act, the 78th Congress was especially concerned about the social and cultural ravages of unemployment. It was less concerned with any explicit notion of economic growth. For one thing, national income accounting was in its infancy. Also, Congress was still reluctant to get the federal government very involved in economic affairs, especially with heightened concerns over the sway of communist ideology. That said, the Employment Act did establish the Council of Economic Advisors, which turned out to be a highly influential pro-growth institution for decades to come.

The American economy ran fairly smoothly and grew very rapidly for the next couple of decades, but by the 1970s, American political leadership was beside itself with the problem of stagflation, that is, recession (“stagnation”) concurrent with inflation. Economists thought you could have only one or the other for any significant period of time and that they were, in fact, countervailing forces. Unlike World War II, though, the Vietnam War wasn’t sufficient to kick the real economy into high gear. Efforts to stimulate investment and consumer spending by loosening the money supply only led to inflation. Thus, stagflation.

The bedeviling bouts of stagflation finally led Richard M. Nixon to announce, “We are all Keynesians now,” recognizing that conservative diehards were some of the last to accept any government involvement in macroeconomic policy. Nixon had established the Bureau of Economic Analysis in 1972 for state-of-the-art accounting and GDP calculation. The 95th Congress, led by Hubert Humphrey and Augustus Hawkins, worked to update the Employment Act, which was finally amended as the Full Employment and Balanced Growth Act (FEBGA) and signed by President Carter in 1978. As of then, the US government was fully and formally committed to GDP growth as central economic policy.

It was easy for supporters of FEBGA to argue mathematically that, all else equal, more jobs could be had with greater GDP. It was also easy for Big Money to hide behind pro-growth policy for purposes of accumulating more capital and increasing CEO salaries, without any concern for creating more jobs. Not surprisingly, FEBGA ended up a thick mix of fiscal and monetary policy that serves the capitalist as well as the labor force.

FEBGA is often referred to with the shorthand “Employment Act,” saving a number of syllables and reminding us of its original (1946) focus. I favor the full 1978 title, even if only via acronym, as a reminder that GDP growth is not just some wistful political notion or rhetorical tool but rather a formal, central policy of the USA pursued with fiscal, monetary, and deregulatory means, as well as diplomacy and terms of trade in international affairs.

Now, more than a half century later and in the midst of an economy-crushing pandemic, it’s time to rewrite FEBGA. We need a Full and Sustainable Employment Act, with the very name change communicating that growth is no longer sustainable.[1] The Full and Sustainable Employment Act will mark the transition from economic growth to a steady state economy, politically and every bit as formally as FEGBA called for growth.

Pro-growth politicians (or perhaps Big Money) came up with the brilliant metaphor, “A rising tide lifts all boats.” While at least one source attributes the phrase to President John F. Kennedy, it seems like the stuff of Madison Avenue. And, when limits to growth aren’t acknowledged, the logic illustrated by the metaphor is unassailable. All else equal (“ceteris paribus” in econ-speak), a growing GDP means more jobs. Of course the devil is in the phrase “all else equal,” because little is equal on the tilted chess board of a capitalist economy. Instead of more jobs, a growing GDP too often means more expensive technology and billionaire CEOs, who are just as effective at blasting ships out of the water as making way for more boats.

Either way, the metaphor of the rising tide sinks like a presidential approval rating when limits to growth are recognized, as they increasingly are and should especially be in the context of COVID-19. There is only so much water; the tide can’t rise forever. There is a limit to the number of boats at sea, too, and even a limit to boat-building material on shore. It’s high time for the “rising tide” metaphor to ebb all the way back into the rustic recesses of faded political minds.

It so happens that the acronym of Full and Sustainable Employment Act—FSEA—is useful for nailing the coffin shut on the “rising tide” metaphor. Combining “F” (for Full) and “SEA” invokes the image of a full sea. Why not take advantage of such a linguistic coincidence and make the message a little clearer yet? It is not unprecedented for Congress to wax metaphorical with the short title of a paradigm-shifting statute; they might as well call this one the “Full Seas Act.”

ships and the Full Sustainable Employment Act

“A rising tide lifts all boats” was a fine metaphor for the 20th century, but in the 21st century the seas are full. (Image: CC0, Credit: Good Free Photos)

What might the Full Seas Act actually look like? How will it conduce a steady state economy? What happens to the pro-growth arrangements established by FEBGA? The best way to envision these developments is to consider a proposed Section 2.[2]

Full Seas Act—Findings and Declaration

In a typical act of Congress, Section 1 provides a short title (“Full Seas Act” in this case). Section 2 is in many ways the most important section of a path-breaking statute because it establishes the key findings and declarations of Congress. It comprises a sort of preamble and emanates the spirit of the law. It justifies the details laid out in subsequent sections, and future policy development at the agency level will be informed by its content as well.

On the other hand, readers should keep in mind that Section 2 is never designed to address all the details of the challenge at hand, much less all the problems of the world. The crux of the Full Seas Act is a formal transition from economic growth to the steady state economy (most likely via degrowth). Therefore, Section 2 will not include references to specific policy tools such as minimum wages, energy caps, banking reforms, etc. Sections 3 and beyond just as surely will, however.

Without further ado, then, the initial public offering of the Full Seas Act, Section 2, more or less consistent with the canons of statutory construction:

 

SEC. 2.

(a) FINDINGS. The Congress finds that—

(1) Economic growth, as measured with gross domestic product (GDP), requires a growing human population, increasing per capita consumption, or both.

(2) Consistent with the natural sciences, including basic principles of physics and biology, there are limits to economic growth within and among nations.

(3) There is a fundamental conflict between economic growth and environmental protection, including the maintenance of: clean air and water; productive soils; biological diversity; stocks of natural resources including water, timber, fisheries, minerals, and fossil fuels, and; funds of ecosystem services including nutrient cycling, pollination, waste absorption, and carbon sequestration.

(4) A well-maintained, non-degraded environment is the foundation of a productive economy. Therefore, and because of the fundamental conflict between economic growth and environmental protection, there is also a fundamental conflict between economic growth and the long-term maintenance of the economy including jobs, income, and wellbeing.

(5) A well-maintained economy is vital to national defense. Therefore, and because of the fundamental conflict between economic growth and the long-term maintenance of the economy, there is a fundamental conflict between economic growth and national security.

(6) There is abundant environmental and economic evidence that long-term limits to growth have been and are being reached and exceeded in the Nation, other nations, and globally.

(7) There is abundant evidence that perennial fiscal and monetary efforts to stimulate GDP growth are increasingly causing environmental, economic, and social harm while resulting in fewer benefits, with the harm gradually exceeding the benefits.

(b) DECLARATION. The Congress declares that—

(1) It is heretofore the policy of the Nation to undertake a gradual but certain transition from the goal and pursuit of economic growth to the goal and pursuit of a sustainable steady state economy, with stabilized or mildly fluctuating population and per capita consumption as generally indicated, all else being equal, by a mildly fluctuating GDP.

(2) The transition to a steady state economy must be undertaken with every intent and effort to achieve and maintain the full employment of the labor force consistent with environmental protection and other aspects of economic sustainability including a balanced federal budget and the effective control of inflation.

(3) The President, President’s Cabinet, Council of Economic Advisors, Federal Reserve, and federal agency directors will immediately cease and desist from developing strategies and initiatives to grow or stimulate the economy. Existing policies, programs, and projects designed explicitly to grow or stimulate the economy shall not be extended beyond fiscal year 2021 or beyond the designated sunset date, whichever comes later.

(4) The Congressional Research Service, collaborating with the Office of Management and Budget and Council of Economic Advisers, will review and summarize the federal agency mission statements, goals, objectives, policies, programs, and practices designed for GDP growth, producing a Report on Federal Growth Incentives no later than 30 April 2022.

(5) A Commission on Economic Sustainability (“the Commission”) is hereby established to include the Administrator of the Environmental Protection Agency and the Secretaries of Agriculture, Energy, and Commerce, chaired by the Secretary of the Interior, to estimate and monitor environmentally sustainable levels of population and socially optimal levels of GDP. The Commission will produce a Report on Sustainable Population and Optimal GDP no later than 31 August 2022.

(6) The Commission Chair, with counsel of the Chairman of the Council of Economic Advisors, Secretary of Commerce, Federal Reserve Chair, and Secretary of the Treasury, drawing on the Report on Federal Growth Incentives and the Report on Sustainable Population and Optimal GDP, and pursuant to the framework provided in subsequent sections herein, will develop and deliver to the President, no later than 31 August 2023, a 25-year Steady-State Transition Plan detailing and scheduling the adjustments, modifications, additions, and deletions necessary to establish a system of government operations most conducive to a steady state economy at an estimated optimal level of GDP.

(7) The President, Cabinet secretaries, and federal agency directors shall not overlook the existence, neglect the enforcement, or underfund the performance of the Clean Air Act, Clean Water Act, Endangered Species Act, National Environmental Policy Act, or any other of the Nation’s environmental laws or regulations on grounds that said laws or regulations may interfere with the workings of the economy or slow the rate of GDP growth.

 

Stay Tuned for the Rest of the Full Seas Act

For policy wonks and steady-state advocates, exciting times lie ahead as Sections 3 and beyond of the Full Seas Act will feature long-awaited steady-state policy instruments. The starting point should be the top ten policies favored by Herman Daly. Chapter 11 of Supply Shock is largely for purposes of informing the Full Seas Act. And, at the risk of unintentionally omitting dozens of helpful individuals, now is the time to revisit specific proposals of scholars such as Peter Victor, Tim Jackson, Dan O’Neill, and Phil Lawn as well as the rich mix of overlapping ideas emanating from the European degrowth movement.


“Steady statesmanship” an essential aspect of the Full Seas Act. (Image: CC0, Credit: U.S. Department of State)

Speaking of the latter, the Full Seas Act could hardly be effective in a world pursuing GDP growth with only rare exceptions such as Bhutan and New Zealand. Ramped up levels of international trade will be difficult to reconcile with the steady state economy of a huge nation-state. Therefore, the Full Seas Act must address the need for steady statesmanship in international diplomacy.

We should take a page from the playbook of the 93rd Congress, which passed the Endangered Species Act of 1973. Congress used Section 8 largely to implement American obligations pursuant to the Convention on International Trade in Endangered Species of Wild Fauna and Flora, or “CITES,” one of the most sweeping international conservation agreements to date.

Our approach in the Full Seas Act needs to be more proactive, because in this case there is no convention ready and waiting to be implemented. We should devote one section, then, to fleshing out and pursuing the development of a Convention on Economic Sustainability, most likely with a United Nations secretariat. This convention will be assembled for purposes of addressing global limits to growth and the need for “contraction and convergence,” or the acceptance of degrowth in wealthy countries while nations with ubiquitous poverty are assisted to the extent that they have diplomatically established their own sustainable steady-state goals.

Steady statesmanship may be even more difficult than the domestic policy reforms required for an American steady state economy. Yet the harsh realities of COVID make such statesmanship feasible as well. In any event, does it matter how difficult it is, in deciding whether to pursue it? After all, what is the alternative? As we like to say at CASSE, peace is a steady state economy.

And so is health.

[1] See Chapter 11, “A Call for Steady Statesmen,” in Czech, B., Supply Shock: Economic Growth at the Crossroads and the Steady State Solution (2013, New Society Publishers) for the initial proposal of the Full and Sustainable Employment Act along with numerous policy tools and institutions to be considered in drafting the legislation.
[2]The Section 2 proposed herein does not include amending specifications. The bill presented to Congress will specify which clauses of FEBGA are to be amended, and how. Basically, however, the intent is to replace Section 2 of FEBGA with the proposed Section 2 herein.

Brian Czech

Brian Czech is the Executive Director of the Center for the Advancement of the Steady State Economy.

The post A Post-COVID Vision: The Full and Sustainable Employment Act appeared first on Center for the Advancement of the Steady State Economy.


The Race to Measure the Global Emissions Plunge

Published by Anonymous (not verified) on Tue, 19/05/2020 - 3:03am in

The Covid-19 pandemic is taking a toll on science. Laboratories are shuttered, major field campaigns are suspended and scientists who traveled to remote parts of the globe to conduct research are struggling to return to a world in lockdown. But some research has kept going through it all, including a National Oceanic and Atmospheric Administration–led effort to keep tabs on the amount of carbon dioxide in Earth’s atmosphere.

NOAA’s Global Greenhouse Gas Reference Network might not be a household name, but the agency considers its activities as essential as the work of NOAA’s National Weather Service forecasters. As a result, this global network of staffed observatories, mountain stations and remote sampling sites that collect and record atmospheric concentrations of key greenhouse gases including CO2, methane and nitrous oxide is up and running despite the pandemic. The reason is simple: If this network were to go down even for a few weeks, one of our best sources of intel on how humans are altering the atmosphere would disappear, disrupting records that have been going strong for decades.

The disruption would be very poorly timed.

“It has the best lens on trends in our atmospheric makeup,” University of Colorado Boulder research scientist Bruce Vaughn said of NOAA’s greenhouse gas network. “Enter the pandemic, which creates this enormous, widespread reduction in fossil fuel emissions globally. I don’t think we could have designed a better experiment for our atmosphere.”

The greenhouse gas network has a few different core components, including four “baseline” observatories (at Mauna Loa, Hawaii; Barrow, Alaska; American Samoa; and the South Pole), which have been continually monitoring the atmosphere’s carbon dioxide concentration since the 1970s, as well as nine tower and mountain sites across North America that have been collecting similar data since the 1990s. In addition, NOAA coordinates a remote flask collection network that currently consists of 55 locations around the world where local researchers or volunteers collect air samples in bottles every week that are shipped to a federal lab in Boulder, Colorado, for analysis.

Data from the network and its partner stations is behind some of climate science’s greatest hits, including the Mauna Loa observatory’s long-running CO2 measurements, which alerted the world that Earth’s atmosphere breached the ominous 400 parts per million threshold in 2013 and that it’s been logging new CO2 records ever since. In addition to carbon accounting, the network allows scientists to see what fraction of our CO2 emissions are being absorbed by the oceans and land and to look for evidence of dangerous tipping points in the climate system, like a hypothetical but oft-discussed massive pulse of methane from thawing Arctic permafrost.

For the past several weeks, NOAA has scrambled to keep this vital climate monitoring work afloat amid global travel restrictions and stay-at-home orders. So far, it has been largely successful — although parts of the network are feeling the strain.

mauna loaThe NOAA Mauno Loa Observatory has been gathering emissions data since 1958. Credit: Christopher Michel / Flickr

For now, all four permanent observatories are still up and running, as are those nine mountain sites, according to greenhouse gas monitoring network lead Arlyn Andrews. At the utterly isolated South Pole Observatory, it’s business as usual. But the observatories at Mauna Loa and Barrow are limiting the number of people on site at once, with just two staff going up to the Hawaiian observatory every day and a lone technician running the show in Alaska.

Meanwhile, the American Samoa Observatory’s lone NOAA scientist is continuing to collect data for now, but NOAA is monitoring this station closely in case the situation on the Pacific island where the observatory is located changes. “That’s the one most likely to go down,” Andrews said.

The U.S. territory is currently operating under Code Blue restrictions, meaning public gatherings are suspended and government departments are operating at 50 percent staffing levels. If Covid-19 starts to spread widely, the territory could enact far stricter containment measures, including suspending all passenger air and sea travel and most government operations. NOAA spokesperson Theo Stein said that the Coast Guard has a C-130 plane available to evacuate several of its staff from the island if necessary, and that this plane could be used to evacuate the climate scientist, too.

south poleScientists at the South Pole launch a balloon to take measurements from the ozone layer. Credit: NOAA

The flask network has experienced different challenges. As of last week, four of the 55 sites — in Guam, Barbados, New Zealand and an Oklahoma facility operated by the Department of Energy — were unable to sample due to local stay-at-home orders. At other sites, including several remote island locations, researchers are still collecting air samples but are finding it impossible to ship them back to Colorado for analysis. If these samples sit around for too long, the chemistry of the air inside them could start to change, something NOAA scientists will have to correct for, Andrews said.

Meanwhile, the Boulder-based Global Monitoring Laboratory where samples from around the world are processed is currently staffed by a skeleton crew. Just eight of the roughly 100 scientists and support staff who work there are still showing up, Andrews said, and all of them are adhering to strict social distancing and hygiene protocols. Other NOAA employees have been performing “normal work duties” with as much teleworking as possible, according to Stein.

“It’s been a little eerie for those who are there,” said Vaughn, whose CU Boulder lab partners with NOAA to analyze carbon and oxygen isotopes in the flask network samples. It has been granted special permission from the university to continue working on a staggered shift schedule that limits contact among lab members.

Those doing the actual sample collection have also had to adjust to the new world of social distancing. Jen Morse is a climate technician at CU Boulder’s Mountain Research Station. It’s her job to go up to Niwot Ridge every week, collect air samples at 11,500 feet, and pass them off to NOAA for analysis in order to continue the site’s climate record, which dates back to the 1960s. At this time of year, Morse and her fieldwork partner would normally drive up to the shack where they collect samples in a snowcat. But because it’s impossible to social distance inside one of these small, enclosed vehicles, for the past few weeks they’ve been cross-country skiing 4.5 miles to the sample site with their gear in tow, and working apart once they arrive.

Morse doesn’t mind the extra exercise, although she said everything does feel “a bit more stressful” right now.

“I have an underlying tone of anxiety with everything which I think is just how it is right now,” Morse said. “But there’s also increased camaraderie between those of us who are still working.”

south poleScientists release a weather balloon at the South Pole in 1978. Credit: NOAA

All of the extra stress and effort involved in working through the pandemic will pay off if NOAA is able to collect high-quality atmospheric data over the next few months. For weeks, climate scientists have been discussing the massive slowdown in global carbon emissions as billions of people stay home to slow the coronavirus’s spread. A recent analysis by Carbon Brief found that carbon emissions are now on track to fall 5.5 percent this year, which would be the largest annual emissions drop in history.

The signal of this carbon slowdown hasn’t shown up at NOAA’s baseline observatories yet, and scientists don’t expect it will for another few months at least. For context, Andrews said it would take four to six months for a hypothetical Northern Hemisphere-wide emissions dip of around 30 percent to show up in these records; a smaller drop could take even longer to become visible and would be more difficult to distinguish from the yearly variability associated with carbon-absorbing plants and with soils, which can absorb or release carbon. Andrews said NOAA is keeping a close eye on its Mauna Loa climate record, which is the first place scientists think a global emissions dip might be visible.

“We’re definitely going to be looking, I just think it’s going to take a while,” she said.

Finding such a signal could turn this strange era into a teaching tool, Vaughn said. Although everyone agrees a pandemic is a terrible way to reduce emissions, the last few months of lockdowns may offer a real-world demonstration of what would happen to the atmosphere if humanity took aggressive action to fight climate change.

“If you believe there’s any hope in saving the Earth by trying to understand it, this is critical,” Vaughn said.

This story originally appeared in High Country News. It is part of the SoJo Exchange of COVID-19 stories from the Solutions Journalism Network, a nonprofit organization dedicated to rigorous reporting about responses to social problems.

The post The Race to Measure the Global Emissions Plunge appeared first on Reasons to be Cheerful.

Book Review: The Green New Deal and Beyond: Ending the Climate Emergency While We Still Can by Stan Cox

Published by Anonymous (not verified) on Sat, 16/05/2020 - 3:46am in

By Gerry Greaves
Stan Cox Book

The Green New Deal and Beyond: Ending the Climate Emergency While We Still Can
By Stan Cox
City Lights Books
$16.95

Achieving sustainable societies globally is likely to be a defining challenge of the 21st century. There is a growing realization that we must act to mitigate the climate crisis. There is also a growing understanding that social and economic injustice must be solved simultaneously. There are many ideas of how to achieve this, but none seems to have caught widespread attention as much as the Green New Deal. This resolution of the U.S. House of Representatives is not an action plan. It is more like a high-level set of guiding principles.

In his new book, The Green New Deal and Beyond, Stan Cox makes the case that even though the Green New Deal Resolution is broad, it doesn’t cover all environmental and economic issues. First, even though there is a focus on eliminating greenhouse gas emissions and developing renewable energy, there are no explicit means to eliminate fossil fuels. This is a serious shortcoming. A more serious shortcoming is that the Green New Deal encourages economic growth. Economic growth makes it far more difficult to eliminate greenhouse gas emissions and exacerbates a host of other environmental issues. A small but rapidly growing group of people think that economic growth must be halted or even reversed to achieve sustainable societies. This is not to say this is an end to progress. Instead progress will be measured by the ability of people to live healthier, happier, and more fulfilling lives.

The first half of the book provides a good overview of the economic and social justice progress made over the last 100 years or so. From the 1920s through the 1970s, great progress was made with the original New Deal, Social Security, workers’ rights, welfare, and the civil rights movement. However, starting in the 1980s progress slowed and then eroded. Today economic inequality is similar to what it was in the 1920s. The civil rights wins of the 1960s have proven to not be as successful as they seemed.

The second half of the book focuses on policies beyond the Green New Deal, such as eliminating fossil fuels. Dr. Cox proposes a system he calls “cap and ration” whereby greenhouse gas emissions are capped by issuing or auctioning permits. Over time the cap would be lowered to zero. The cap would be aggressive, forcing a reduction in total energy brought to market, increasing prices and resulting in the need for price controls. To manage a fair distribution of the reduced energy inputs, a rationing system would be required down to the individual household level. He describes a “Victory Plan” to administer this as follows:

Modeled in part on the civilian mobilization for World War II, the Victory Plan would be carried out by a broad array of agencies, including a Climate Mobilization Board, which would administer caps on fossil fuels and materials and oversee production goals. The Mobilization Board would be an analog of the War Production Board of the 1940s. Another agency from that era, the Office of Price Administration, would be revived under its original name to oversee price controls and rationing.

Overall, The Green New Deal and Beyond is well written and accessible. It includes almost 300 endnotes but unfortunately no index. The assessment of our environmental and economic challenges is spot on; so is his vision of a sustainable society as a steady state economy that uses less energy and other natural resources. On the other hand, his proposal for the transition from our consumerist society to a sustainable one is heavy-handed, overly complex, and too reliant on central planning. The only time large-scale central planning has worked well is for short-term civilian mobilizations for war. In his 2014 blog article, “Cold War Leftovers,” Herman Daly very succinctly addresses the issue of what should be planned and what should be left to the market. He wrote:

Steady-state economics deals with three problems: sustainable scale, just distribution, and efficient allocation. It takes the first two issues, scale, and distribution, away from the market. It calls for quantitative ecological limits on the throughput of resources so that the market can no longer determine the physical scale of the economy relative to the biosphere. It also advocates social limits to the range of income inequality, so that the market can no longer generate large inequalities of wealth. Subject to these two prior macro-level aggregate constraints, it then relies on the market to efficiently allocate resources.

Daly’s guidance seems wiser by the day, especially when we consider his further admonition to distinguish rival and excludable goods from those which are not, when identifying which goods are fit for market allocation.

fossil fuel

Dr. Cox’s Victory Plan would entail caps on fossil fuels and ration energy use down to the individual household level. (Image: CC BY-SA 3.0, Credit: Sebastian Schlüter)

So, where does this leave us? We have an ecological imperative to address climate change and a moral imperative to address economic inequality. Executing a transition to a sustainable society is, of course, an extremely difficult challenge. If done well, this can be a real human advancement; however, if botched, it can become an epic catastrophe.

While this transition is partly an engineering problem, it also involves climatology, politics, policy debates, ideological differences, economics, and power struggles. How do we find a path to sustainable societies, then? It may be helpful to look at how difficult problems have been addressed in the past. Often various ideas are proposed. They are criticized, tested, modified, debated, combined, and sometimes abandoned. The best ones survive. We need diverse ideas to come into the light of day where they can be debated and advanced, or abandoned. Time is short. We have only about a decade to get this right. Dr. Cox has offered some bold ideas. It’s up to the rest of us to read them and join the conversation.

Gerry GreavesGerry Greaves is a retired engineer and the CASSE Chapter Director for Upstate South Carolina.

The post Book Review: <em>The Green New Deal and Beyond: Ending the Climate Emergency While We Still Can</em> by Stan Cox appeared first on Center for the Advancement of the Steady State Economy.


So Your Landlord Is Trying to Evict You

Published by Anonymous (not verified) on Fri, 15/05/2020 - 4:06pm in

Millions of Americans have lost their jobs, aren’t able to pay rent or their mortgages, and therefore face eviction or foreclosure. Yet the best that even “liberal” politicians are offering is a moratorium on evictions until some future point in time.

How Can Municipal Water Systems Respond To Climate Change?

Published by Anonymous (not verified) on Thu, 14/05/2020 - 10:54am in

Climate Change Demands Sustainable Water System Solutions Across the United States, municipal water systems are a lifeline, providing safe drinking water to millions of people – or at least they’re supposed to. Unfortunately, we’ve seen that places like Flint, Michigan, Pittsburgh, Pennsylvania, and Newark, New Jersey, are just a few of the US cities with badly…

The post How Can Municipal Water Systems Respond To Climate Change? appeared first on Peak Oil.

Globalisation, a pandemic and the US dollar

Published by Anonymous (not verified) on Mon, 11/05/2020 - 11:50pm in

As published on Progressive International  on Monday, 11 May, 2020

She said, "My name's Flo, and you're on the right track
But look here, daddy, I wear furs on my back
So if you want to have fun in this man's land
Let Lincoln and Jackson start shaking hands

I reached in my pocket, and to her big surprise
There was Lincoln staring her dead in the eye
On a greenback, greenback dollar bill
Just a little piece of paper, coated with chlorophyll

Ray Charles, 1957.  

 

Things are falling apart. Mere anarchy is loosed upon the world. Globalisation cannot hold.

We know that because Henry Paulson, once CEO of Goldman Sachs, and then US Treasury Secretary during the last crisis, is rallying the world’s capitalists to defend globalisation from reshoring, protectionism and immigration controls. Paulson understands that this is a war of ideas. He warned in the columns of the Financial Times that “the impending battle will pit forces of openness rooted in market principles against those of closure across four dimensions: trade, capital flows, innovation and global institutions.”

This “impending battle” is already skewed in favour of the world’s creditor class — backed as they are by central bankers, and in particular by the Federal Reserve, deploying its most potent weapon, the US dollar, that “ little piece of paper, coated with chlorophyll.” Their actions have made clear that there may be no international committee to save the people from a global pandemic, yet there is an international committee creating a “giant safety net” to save private finance from the pandemic. Central bank governors have engaged in decisive, expansive and internationally co-ordinated action to save rentier capitalism even while the governments of Presidents Trump, Bolsonaro, Modi and Johnson clown around, grievously mishandling the Covid-19 crisis. The rise of nationalism and protectionism that has raised these authoritarian leaders to power, coupled with extraordinary central bank action in support of Wall St and the City of London, are all reactions to, and consequences of, negative externalities that are globalisation’s hall marks: connectivity and integration. The pandemic too is a consequence of the systemic health risks inherent in the connectivity and integration of the globalisation project.

Where do progressives stand on this international battlefield of ideas regarding globalisation and monetary policy? Judging by the level and tone of western public debate, progressives are on the margins of the pro- and anti-globalisation arena. Both the Jeremy Corbyn-led election campaign and the Bernie Sanders presidential bid in the United States offered sound analysis, deep compassion and sincere solidarity for the victims of globalisation and climate breakdown. But their campaigns often focused on domestic issues — health systems, affordable housing, nationalisation of the railways, kindness to the poor and homeless — and ignored both the globalised financial infrastructure that makes reform of these sectors virtually impossible, and the political establishment that will fight to the death to defend the system.

This ignorance of the injurious elements of the international monetary system and its impact on the Global South muffles debate and inhibits “radical possibilities.” After all, it is not possible to transform a system, to re-design an international financial architecture, when that system is not understood, discussed and debated.

To decide where we are going, in other words, we must understand how we got here.

How did we get here?

In contrast to recent experience of international crisis, the trauma of the Great Depression and the Second World War led to much public debate about the international financial system. John Maynard Keynes was a regular contributor to the popular press, including the right-wing Daily Mail, and engaged the public with frequent radio broadcasts on macro economic policy. President Roosevelt did the same. The 1944 Bretton Woods Agreement was an outcome in part, of these debates, and led to the building of an international financial architecture designed to manage and stabilise the imbalances in both trade and finance that had disrupted the world system, raised political tensions and led to a catastrophic war. The architecture helped manage trade imbalances worldwide for almost thirty years. It ensured individual currencies were tethered to an asset of fixed value. This prevented currency speculation and ensure a nation’s specie reflected the strengths and needs of the domestic economy, not the interests of capital markets in the international economy.

However, soon there were strains and stresses. As early as 1963, Robert McNamara cautioned that US overseas military spending had become so massive as to threaten what he called “the gold cover” of the U.S dollar. In his magisterial study of the economic strategy of American empire, Michael Hudson relates that in May 1970, Secretary of the US Treasury David Kennedy warned that if foreign countries did not make it feasible for the United States to increase its exports, Congress might restrict imports into the United States. “In essence,” writes Hudson, “he was stating that as US private capital continued to take over the industries and companies of Europe and Asia, establishing a US deficit in its balance of payments on capital account, the nations that were forced into a surplus position by receiving these dollars should increase their imports from the United States in amounts equivalent to the US cost of seizing control of their industries and enterprises.”

Frustrated in this goal by stubborn allies like President de Gaulle, Nixon unilaterally and without consultation dismantled the Bretton Woods System by suspending all further sale of US gold to foreign central banks. Henceforth the $61 billion of liquid debt owed to foreigners would be paid only in the form of “a greenback dollar bill, a little piece of paper, coated with chlorophyll.” With gold payments suspended, the foreign overseas debt of the United States was, in effect, repudiated. Although it is never described as such by economists and historians, Nixon’s action — ‘the Nixon Shock’ — led, at the time, to the largest sovereign debt default in history.

From thereon, foreign currencies would be convertible not into a safe asset whose value was fixed, but into paper US dollars. And instead of gold, US short-term debt (Treasury bills) would in future be held among the monetary reserves of foreign central banks. In other words, the short-term debt obligations of the United States government were then substituted for gold, to ultimately became the world’s official monetary reserve.

But Nixon had more to do to consolidate the United States as global hegemon.

The de-linking of the dollar to gold in 1971 had led, predictably, to a fall in the value of the dollar. Revenues earned by oil-producing countries now purchased less in international markets.To add to the distress of Middle Eastern oil producers, the US backed Israel in the Arab-Israeli war of 1973. In response, the oil cartel (OPEC) dramatically raised the price of oil. Massive earnings from Middle Eastern oil sales flooded into western banks and financial institutions, which reported net average annual growth rates of deposits of between 25-30 percent. Higher oil prices combined with post-Bretton Woods financial deregulation triggered inflation worldwide.

And so William Simon, newly appointed US Treasury secretary, and his deputy, Gerry Parsky were tasked by President Nixon and Henry Kissinger to negotiate a deal with the Saudis.The goal was clear: to persuade the Saudi King to invest the revenues from his oil fields in US debt.The SaudiKing Faisal bin Abdulaziz Al Saud demanded just one condition in exchange:the country’s Treasury purchases, its financing of the US deficit, should stay “strictly secret,” according to a diplomatic cable obtained by Bloomberg from the National Archives database.

The Saudis secret was kept for more than four decades, and the arrangement made the Saudi Kingdom one of America’s largest foreign creditors. It has proved a useful diplomatic weapon, and it helps explain the US government’s reluctance to investigate the brutal assassination of a Washington Post journalist and Saudi dissident, Jamal Khashoggi in 2018. In April 2016, Saudi Arabia warned it would start selling as much as $750 billion in Treasuries and other assets if Congress passeda bill allowing the kingdom to be held liable in US courts for the Sept. 11 terrorist attacks, according to the New York Times.

The dollarization of fossil fuels transformed the international system, and led to the creation of the petrodollar — the “key to the functioning of neo-colonial money,” as former Ecuadorian minister and Progressive International advisor Andres Arauz has argued.

The ‘Nixon Shock’ and the petrodollar were central to the creation and maintenance of the global hegemon. Both contributed to the deregulation, connectivity and integration that financialised and carbonised the global economy. In that sense today’s economic, ecological and health crises are, in large part, a consequence of geopolitical decisions taken back in 1971.

What is the current international monetary system?

If today’s international monetary system is the outcome of US government decisions, it works effectively to protect the interests of the globalised rentier class — just as the gold standard of the nineteenth and early twentieth century protected global interests based in the City of London.

At the apex of the system stands the Federal Reserve: issuer of the world’s reserve currency. The US dollar is the central, load-bearing beam of the international monetary architecture.

As such, the Fed is now the sole source of global liquidity, providing dollars (via ‘swap lines’) not only to every bank and creditor in the world, but also to a chosen few of the world’s central banks. Those excluded from this imperious largesse include most low-income countries, but also China.

Despite its official mandate, the Fed’s mission in these times is not the security and prosperity of the domestic economy over which its governors preside, and from which they derive their mandate. Instead, the Fed is effectively a publicly backed institution whose operations are driven effectively by private authority, almost completely insulated from democratic oversight or accountability.

Increasingly the varied and numerous interventions of both the Fed and other central banks are undertaken to protect just one class operating in the international system: creditors, investors and speculators. To take one jargon-heavy example, the liquidity injections of the Federal Reserve — aimed at supporting private capital markets — are actually undertaken in the shadow banking sector, through repo market operations (where, as in a pawnshop, collateral is temporarily swapped for cash) rather than through the time honoured practice of open market asset purchases in exchange for liquidity.

In other words, the Federal Reserve and other central bank operations now provide security and protection to a global rentier class, including private equity (PE) firms that “harness secrecy to fleece investors and taxpayers.” Rather than borrowing in their own name, risk-averse PE firms loaded up target companies with debt, and then as ‘shadow banks’ began lending to US households and firms. When the coronavirus pandemic sent “credit markets into a tailspin in March”, the PE firm Apollo, having avoided taxes, then lobbied hard and successfully to be bailed out by the taxpayer. The Fed’s spectacular and unprecedented interventions in March, 2020 as Trevor Jackson argues, was “to flood financial markets with cash as quickly as possible, so banks could keep lending, buyers of stocks could keep buying, and institutions could keep making their debt payments” (Emphasis added).Far from deflating the global debt bubble, the Federal Reserve is keeping debt, and its owners, buoyant.

It is also why, despite its awesome power, the Fed has not succeeded in managing a deeply unstable global economy. Indeed it may have contributed to economic failure. As the IMF explains in the 2020 Global Financial Stability Report, the Fed turned a blind eye as private credit markets expanded rapidly after the 2007-9 global financial crisis, reaching $9 trillion globally. Simultaneously weak regulation by central bankers lowered borrowers’ credit quality, and weakened underwriting standards and investor protections. These risky credit markets — in high yield (‘junk’) bonds, leveraged loans and private debt — continued to show stresses through early April, despite the Fed’s massive cash injection.

So, in the interests of international creditors, the Federal Reserve is propping up heavily over-indebted firms, when the real economy gives every indication of spiralling downwards into deflation. Who benefits from a deflationary spiral? You guessed it: the rentier class. As prices and wages fall, the value of debt rises, as does the cost of servicing debt.

Deflation now haunts the global economy. Even while it triggers falling prices, profits and rising unemployment, it enriches creditors. That is because deflation “involves a transfer of wealth from the rest of the community to the rentier class,” as wrote Keynes in A Tract on Monetary Reform, “just as inflation involves the opposite… It involves a transference from all borrowers, that is to say from traders, manufacturers, and farmers to lenders. From the active to the inactive.”

What are the consequences for the Global South?

As a result of the fickle and volatile actions of global investors, emerging and frontier markets experienced the sharpest portfolio flow reversal on record, according to the IMF. $100 billion of capital outflows over the last few weeks of March and early April, 2020 crushed the currencies of low-income countries, while simultaneously inflating the dollar’s value. Because the US dollar alone is recognised by international markets for the payment of vital imports, its strength increased the cost of dollar-denominated imports. This in turn led to trade and capital account imbalances, which then prompted the ghouls of the global economy — western-based rating agencies — to downgrade countries that were victims of capital flight. Downgrades in turn raised borrowing costs and tightened credit availability at a time when global markets for poor country commodity exports were already weak, cutting their income. Simultaneously weakened currencies raised the cost of purchasing vital equipment and pharmaceuticals from abroad.

Impoverished countries were effectively sacrificed on the cross of the US dollar.

That recent stampede of capital and its impact on the lives and livelihoods of millions of people in the Global South has gone largely unremarked in progressive circles. But capital flight on the mere whim of investors, coupled with the subsequent strengthening of the US dollar, are not accidental nor inevitable consequences of the pandemic. The virus, after all, portends greater economic failure in the United States than in many emerging markets. Nor can it be explained directly by sudden changes in the economic circumstances of the countries trampled down by investors’ rush for the exit. Instead, it is a consequence of the international system’s design— an international financial architecture purposed to accommodate the whims, no matter how irrational, of investors, and to protect the interests of creditors.

Can the IMF ride to the rescue?

Across the universe of commentary on ‘what is to be done’ about the international financial crisis induced by Covid-19, there is a near consensus on the need for the International Monetary Fund (IMF) to take a greater role. In particular, many advocate for the IMF to issue billions of dollars worth of Special Drawing Rights, distributing them to its members’ central banks. These SDRs, as they are known, have become a go-to solution to fixing the problem of dollar liquidity in the context of the present pandemic.

But from a progressive perspective, there are real downsides to bequeathing this great power on the IMF.

First, the institution is not trusted by debtor nations because of its sustained defence of the interests of international creditors — both sovereign and commercial creditors. The IMF acts as agent on behalf of creditors and imposes policy conditionalities on countries whose specific purpose — while often disguised as ‘stabilisation programmes’ — is to generate resources for foreign creditors, and ensure the latter do not make losses on loans to sovereign governments.

Second, the issue of SDRs by the IMF is simply another way for low-income countries to acquire dollars from the currency hegemon – via the IMF, not the open market.

Furthermore, the hegemon’s voting power at the IMF allows it to veto any proposals to allocate SDRs deemed inimical to US interests — as defined by the American President. Hence the Trump administration’s decision to veto, “for now,” the impassioned plea by for an increased allocation of SDRs reportedly “because it does not want to give China and Iran access to unconditional extra reserves.”

What changes to the international financial system are needed?

If we are to win the battle of ideas — if we are to reverse hyperglobalisation and its cruel preference for rentierism over the interests of people and planet — then progressives must develop a plan for dismantling the current system, and building a new, more just, democratic and ultimately sustainable international monetary architecture.

This begins with challenging dollar supremacy.

One objective that should be explored is the possibility of creating a system in which all currencies could be used in international as well as domestic transactions, regardless of the size of the economies in which they are issued. As Jane D’Arista argued in 2003, “the international reserve asset (the world currency) itself must respond to the need for inclusiveness: its value must be based on a trade-weighted basket of currencies of all member countries.”

At the apex of a progressive international monetary architecture will be a bank: an international institution that facilitates transactions between nations or regions of nations. It could use its powers to discourage countries that build up ‘overdrafts’ — deficits in their trade, and discipline member countries that build up massive surpluses — because one country’s surplus is another’s deficit. By that means it could help to end the current global imbalances where countries like China and Germany have large trade surpluses, but the US, Spain and Britain have unsustainable deficits. Such imbalances are politically and economically destabilizing.

But it could do more. It could hold the securities (government bonds) of member countries and use these assets or reserve holdings to generate additional liquidity. In other words, safe sovereign collateral assets would enable the bank to do what the Fed currently does, create liquidity and play the role of ‘lender of last resort’.

Fundamental to the health of the international system will be its democratic oversight and management — not by private authority, but by public authority. Finance must once again be made servant, not master of the global economy, the European economy or any national economy.

These ideas may seem utopian, but establishment figures — sensing the gravity of the present juncture — are moving quickly to adopt more radical ideas. “Multiple reserve currencies would increase the supply of safe assets, alleviating the downward pressures on the global equilibrium interest rate that an asymmetric system can exert,” former Bank of England governor Mark Carney said recently. “And with many countries issuing global safe assets in competition with each other, the safety premium they receive should fall.”

Carney proposes an alternative: a new Synthetic Hegemonic Currency (SHC) that would be best provided by the publicsector, perhaps through a network of central bank digital currencies. “An SHC in the International Monetary and Financial System (IMFS) could support better global outcomes, given the scale of the challenges of the current IMFS and the risks in transition to a new hegemonic reserve currency like the Renminbi. An SHC could dampen the domineering influence of the US dollar on global trade. If the share of trade invoiced in SHC were to rise, shocks in the US would have less potent spillovers through exchange rates, and trade would become less synchronised across countries. By the same token, global trade would become more sensitive to changes in conditions in the countries of the other currencies in the basket backing the SHC.”

It would be hard to describe Carney, who earned his stripes at Goldman Sachs, as a progressive. But the fact that Carney is pushing these novel ideas only goes to show how far progressives must move to reclaim the international financial system as their own terrain of struggle.

The left has very little to say about a world economy now governed effectively by unelected and unaccountable technocrats. On the contrary, some on the progressive end of the political spectrum applaud central bankers’ rescue of risky and often reckless creditors. Adam Tooze recently enthused thatthe Fed had createda“giant public safety net... stretched out across the financial system.”Many other commentators and economists joined in the adulation, which reminds this author of the accolades of the 1990s and early 200s awarded to the infallible ‘maestro’ of the US and global economy, Alan Greenspan.

This enthusiasm for technocratic and essentially undemocratic solutions can be explained in part by the failure of economics. “Financialisation is the least studied and least explored reason behind our inability to create a shared prosperity,” Rana Foroohar argues in her book Makers and Takers (2016). And that helps explain why progressives fail to grasp the structure and purpose of the international financial system and its gains for the rentier class. It also explains the awe with which technocrats at central banks are now regarded by many, and the myopically domestic focus of most left-wing economic debate. Not to mention the absence of serious concern for the crises facing low-income countries.

It is high time we organised to better understand, and to transform the system.

Conclusion

Transformation of the international financial system is urgent if the world is to reverse the harm done to both human societies but also to the ecosystem by the current rampant system of exponential economic ‘growth’ and capital accumulation via financial rentierism.

The current breakdown of the international capitalist system makes a transformation well within the range of ‘radical possibilities’. But let us not forget: the crisis can either be resolved by conflict — with the hegemon drawing on its almighty military power — or by reasoned and progressive transformation of the system.

The big questions we face are these: First, why are progressives not at the forefront of this debate? Second, how to expand public education and understanding of the system and its consequences? Third, how to mobilise public support behind a progressive solution to the current crises?

Perhaps this Progressive International, by convening a global dialogue at this critical juncture, can answer them. Perhaps together we can end our dependence on “the greenback dollar bill,” which after all is “just a little piece of paper, coated with chlorophyll.”

Thrive or dive: can our economy weather the climate crisis?

Published by Anonymous (not verified) on Mon, 11/05/2020 - 6:00pm in

Marco Minasi-Smith, Fortismere School, London

Marco Minasi-Smith, from Fortismere School, London, is the runner-up of the third Bank of England/Financial Times schools blog competition. The competition invited students across the UK to write a post on the theme: the economy and climate change.

While Australia mourns the human and ecological cost of its ‘black summer’ of fires, the tragedy poses a question for economic policy-makers everywhere: how do we prevent climate crises becoming economic ones?

Even a 28 year recession-free economy like Australia’s is reeling from the destruction of 3,000 homes and over 100,000 square kilometres of precious bush, forest and farms. Some towns have run out of water because of the continuing drought. How would our economy cope with a crisis on this scale?

The grim reality is that even if we stop emitting greenhouse gases, NASA argues that such extreme weather and climate events may continue for decades or even centuries. What we can control, however, is our economic preparedness for the inevitable pain. Here are three actions that could make a difference.

First, we must count in dollars not just degrees centigrade. A top team of mathematicians, economists and actuaries must be established to calculate the full financial impact of the climate crisis. This data will focus the minds of policy-makers. Whether the planet warms by one degree or several, we need to know how many billions of dollars it will cost us — and who will pick up the tab. We pore over temperature data but few of us engage in understanding and mitigating our exposure to the costs.

Following the money will also help us budget for the critical but challenging transition away from fossil fuels. For example, for every litre of petrol we buy, the British Chancellor levies 58p in fuel duty. We need electric cars to become mainstream, but this change alone would leave a giant hole in government finances, which in turn limits investment in greener energy. Like it or not, fossil fuels still drive large sections of our economy and financial markets. Our best intentions to divest from them must be backed by sound economic plans to do so.

Second, government funding is needed for the most vital but least profitable long-term research and development. Such direct public sector investment is essential to accelerate green energy development. The private sector is not geared up for the high-risk, multi-decade sums required to wean us off the 80 per cent of energy that still comes from fossil fuels.

Among the toughest problems to solve is sourcing energy for aviation, heavy vehicles, shipping and those types of manufacturing for which the use of renewables is not yet feasible. Just as technically complex is replacing petrochemicals, plastics and synthetic fibres, which all come from fossil fuels, and are used in everything from smartphones to sneakers.

Finally, depoliticise the toughest, most complex financial decisions on climate. The next decade will require all countries to make a series of tough and unpopular decisions such as who pays for mitigation and the impact of climate catastrophes. We need impartial, multidisciplinary experts to make those crucial and controversial decisions, rather than politicians keen to score votes in the next election.

Bad economic decision-making is one storm we can avoid.

If you want to get in touch, please email us at bankunderground@bankofengland.co.uk or leave a comment below.

Comments will only appear once approved by a moderator, and are only published where a full name is supplied. Bank Underground is a blog for Bank of England staff to share views that challenge – or support – prevailing policy orthodoxies. The views expressed here are those of the authors, and are not necessarily those of the Bank of England, or its policy committees.

Loss aversion: the concept every supplier should be utilising to tackle climate change

Published by Anonymous (not verified) on Mon, 11/05/2020 - 6:00pm in

India Loader, South Wilts Grammar School

India Loader, from South Wilts Grammar School, is the winner of the third Bank of England/Financial Times schools blog competition. The competition invited students across the UK to write a post on the theme: the economy and climate change.

To help save the planet and gain a competitive edge, cafes should obey a basic rule of behavioural economics by switching from offering discounts for customers who bring their own cups in favour of charging more for disposable ones.

Consider the astronomical success of the introduction of a 5p charge on plastic bags by British supermarkets. Volumes plummeted by over 86 per cent — an unexpectedly high proportion when the majority of consumers would not even pick up a 5p coin if they saw it lying in the street.

Yet there has been a muted response to the more substantial discounts offered to consumers bringing re-usable cups to cafes for their morning coffee — of up to 50p at Pret A Manger. Up to 55 per cent of shoppers remember to carry their reusable grocery bags to save just 5p, while fewer than 2 per cent of coffee drinkers bring their own cup.

Given that they could save up to ten times as much, why are consumers responding to two seemingly similar scenarios in profoundly different ways? I put it down to the behavioural economics theory of ‘loss aversion’.

Loss aversion arises when the cost associated with giving something up is perceived as greater than the benefit that would accrue from the acquisition of the same thing. This behavioural concept is clearly evident in how consumers react to bringing a re-usable bag or a re-usable cup.

There are many instances in which suppliers offer monetary incentives to promote environmental practices even when it may be significantly more effective to introduce a fine. Just a tweak of policy can often have a disproportionately positive effect.

So to encourage the use of re-usable cups, scrap the discount and introduce a small charge for those who demand disposables. This would play to consumers’ tendency to go to greater lengths to avoid a loss than to seek an equivalent gain.

Starbucks is the first large coffee chain to have rolled out a charge (of 5p) on their paper cups. Given a fantastic consumer response — with three times more people now bringing their own cup — it is baffling why other businesses are not taking the same approach. 

One possibility is that they worry the practice may make them less price competitive: charging 5p for a cup amounts to raising the price of the product for the majority. However, if businesses like Starbucks are transparent about the environmental benefits of the 5p charge, as many supermarkets have been, it could actually increase competitiveness by attracting the rapidly growing number of environmentally conscious consumers. Tackling climate change may begin at the level of the individual. But if businesses can nudge their customers to consume sustainably then by applying behavioural economic theories such as loss aversion, we will have a significantly greater chance of controlling waste before it takes an irreversible toll on the environment.

If you want to get in touch, please email us at bankunderground@bankofengland.co.uk or leave a comment below.

Comments will only appear once approved by a moderator, and are only published where a full name is supplied. Bank Underground is a blog for Bank of England staff to share views that challenge – or support – prevailing policy orthodoxies. The views expressed here are those of the authors, and are not necessarily those of the Bank of England, or its policy committees.

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