This is the first time in the history of the United States that the president has sought to provoke a financial panic to get legislation passed through Congress. While this has proven to be a successful political strategy - after the House of Representatives finally passed the bank bail-out plan today - it marks yet another low point in American politics.
It was incredibly irresponsible for George Bush to tell the American people on national television that the country could be facing another Great Depression. By contrast, when we actually were in the Great Depression, President Roosevelt said: "We have nothing to fear, but fear itself."
It was even more irresponsible for President Bush to seize on the decline in the stock market five days later as evidence that his bailout was needed for the economy. President Bush must surely understand, as all economists know, that the daily swings in the stock market are driven by mass psychology and have almost nothing to do with the underlying strength in the economy.
The scare tactics of President Bush, Henry Paulson, the Treasury secretary, and Ben Bernanke, chairman of the Federal Reserve, created sufficient panic, so that by the time of the first vote on the emergency package in Congress, much of the public believed that the defeat of the bail-out may actually have had serious consequences for the economy. Millions of people have changed their behaviour because of this fear, with many pulling money out of bank and money market accounts, and adjusting their financial plans in other ways.
This effort to promote panic is especially striking since the country's dire economic situation is almost entirely the result of the Bush administration's policy failures. First and foremost, the decision of Paulson and Bernanke (and previously Alan Greenspan) to ignore the housing bubble, allowed for the growth of an $8tn bubble, which is now collapsing.
It is the collapse of this bubble - which has already destroyed more than $4tn in housing wealth, and is likely to destroy another $4tn over the next year - that is at the root of the economy's problems. While competent economists were warning of the bubble and the dire consequences of its collapse, the top officials in the Bush administration were celebrating the rise in homeownership rates.
The Bush administration made the crisis even worse by deregulating Wall Street. This led to the huge over-leveraging of financial institutions, which has vastly complicated the country's economic policies. It is especially disturbing that Secretary Paulson personally profited from these policies, earning millions of dollars in compensation from Goldman Sachs during his years there as its chief executive.
The collapse of the housing bubble, while falling short of the magnitude of the Great Depression, is likely to lead to the worst recession since the second world war. Repairing the damage caused by this bubble will be a long and difficult process. Cleaning up the damage to the political system from President Bush's unprecedented fear campaign may prove to be even more difficult.
07/10/08 © Guardian News and Media Limited 2008
tirsdag den 7. oktober 2008
Environment: Twisted As Unnaturally as the Banks by Julio Godoy
BARCELONA - The financial meltdown in most of the industrialised world presents an opportunity for a new economic model that would end short-sighted search for high returns, according to leading economists attending the IUCN World Conservation Congress here.
"Right now, the most conservative leaders in the industrialised world, such as George W. Bush of the U.S. and Angela Merkel of Germany are allocating public money to save the banks from bankruptcy," Alejandro Nadal, a Mexican economist attending the congress told IPS.
"This rediscovery of the role of the state as a major actor in economic affairs, and the perspective of a new regulation of international financial transactions opens a window of opportunity to rethink neoliberalism in the developing world," Nadal said.
"This is not only an academic question, it is an extreme political matter," he said. And it can have an environmental dimension, he said. Nadal urged the IUCN to coordinate a global effort among civil society organisations to rethink the role of the state in linking macro-economic and environmental policies.
The IUCN (International Union for Conservation of Nature), organiser of the Barcelona congress that continues until Oct. 15, is the oldest and largest global environmental network, with a membership of more than 1,000 governments and NGOs, and almost 11,000 volunteer scientists in more than 160 countries.
"It is time for civil society and environmental organisations to take the world," Pavan Sukhdev, an Indian economist and co-author of 'The Economics of Ecosystems and Sustainability' told IPS.
Unlike earlier crises such as the stock exchange crash of 1987, or the currency crisis of the 1990s in Latin America, South East Asia and Russia, the present crisis has come amidst a new awareness of the dramatic environmental costs of neo-liberalism, Sukhdev said.
"Back then, most of us had no idea of the environmental crisis lurking in nature. But now we are aware that we cannot go on with this economic model based on the destruction of biodiversity and the abuse of most of humankind.
"Now we have the wind on our backs. And when you have wind in your sails, you sail. Let's sail towards a new economic model, one that respects both nature and humanity, instead of this one that destroys them."
Joan Martínez Alier, professor of economics and economic history at the Autonomous University of Barcelona, said the present economic crisis "will mean a welcome change to the totally unsustainable increase of carbon dioxide (CO2) emissions in the last few years."
Carbon dioxide is considered by scientists to be the principal greenhouse gas arising from the combustion of fossil fuels. Greenhouse gases are thought to cause global warming, and consequently climate change and the decimation of biodiversity.
Alier believes the economic crisis, by reducing industrial and transport activities, offers an opportunity to put the economy on a different trajectory regarding material and energy consumption, and could therefore help reduce greenhouse gas emissions.
"The crisis might also offer an opportunity for restructuring social institutions in industrialised countries, with the objective of living well without the imperative of economic growth," Alier said. "Happiness is not necessarily a function of economic growth, above a certain level of income."
But in developing countries, the economic crisis could damage the environment for the converse reason. Since below a certain income level wellbeing is dependent on economic growth, governments may push economic activity regardless of its environmental costs in order to overcome the economic crisis.
"The global economy could suffer a deep and protracted recession as a consequence of the financial crisis," Argentine economist Alain Cibils told IPS. "As the crisis unfolds, priorities will be put on recovery for growth and employment, and controlling inflation, instead of forestalling climate change. Protecting biodiversity, aquifers and soil erosion may be seen as non-priorities."
Cibils said that the neoliberal economic model applied in Argentina, Brazil, Mexico, and other Latin American countries since the late 1980s has given priority to macroeconomic policies aimed at reducing inflation and fiscal deficits, and increasing export, regardless of social and environmental costs.
"These policies are epitomised in Argentina by intensive year-round agriculture concentrated on a couple of crops such as soybean and maize, and priority to short-term high-returns, very much as in financial globalisation," Cibils said.
The land area cultivated with soybean has more than doubled in Argentina from seven million hectares in 1997 to 16 million hectares in 2008. The land for wheat cultivation has remained constant.
"Soybean growing has taken place in Argentina at the expense of native forests," Cibils said. "Year-round agriculture has produced severe soil nutrient depletion and soil degradation, and a substantial loss of biodiversity."
"Right now, the most conservative leaders in the industrialised world, such as George W. Bush of the U.S. and Angela Merkel of Germany are allocating public money to save the banks from bankruptcy," Alejandro Nadal, a Mexican economist attending the congress told IPS.
"This rediscovery of the role of the state as a major actor in economic affairs, and the perspective of a new regulation of international financial transactions opens a window of opportunity to rethink neoliberalism in the developing world," Nadal said.
"This is not only an academic question, it is an extreme political matter," he said. And it can have an environmental dimension, he said. Nadal urged the IUCN to coordinate a global effort among civil society organisations to rethink the role of the state in linking macro-economic and environmental policies.
The IUCN (International Union for Conservation of Nature), organiser of the Barcelona congress that continues until Oct. 15, is the oldest and largest global environmental network, with a membership of more than 1,000 governments and NGOs, and almost 11,000 volunteer scientists in more than 160 countries.
"It is time for civil society and environmental organisations to take the world," Pavan Sukhdev, an Indian economist and co-author of 'The Economics of Ecosystems and Sustainability' told IPS.
Unlike earlier crises such as the stock exchange crash of 1987, or the currency crisis of the 1990s in Latin America, South East Asia and Russia, the present crisis has come amidst a new awareness of the dramatic environmental costs of neo-liberalism, Sukhdev said.
"Back then, most of us had no idea of the environmental crisis lurking in nature. But now we are aware that we cannot go on with this economic model based on the destruction of biodiversity and the abuse of most of humankind.
"Now we have the wind on our backs. And when you have wind in your sails, you sail. Let's sail towards a new economic model, one that respects both nature and humanity, instead of this one that destroys them."
Joan Martínez Alier, professor of economics and economic history at the Autonomous University of Barcelona, said the present economic crisis "will mean a welcome change to the totally unsustainable increase of carbon dioxide (CO2) emissions in the last few years."
Carbon dioxide is considered by scientists to be the principal greenhouse gas arising from the combustion of fossil fuels. Greenhouse gases are thought to cause global warming, and consequently climate change and the decimation of biodiversity.
Alier believes the economic crisis, by reducing industrial and transport activities, offers an opportunity to put the economy on a different trajectory regarding material and energy consumption, and could therefore help reduce greenhouse gas emissions.
"The crisis might also offer an opportunity for restructuring social institutions in industrialised countries, with the objective of living well without the imperative of economic growth," Alier said. "Happiness is not necessarily a function of economic growth, above a certain level of income."
But in developing countries, the economic crisis could damage the environment for the converse reason. Since below a certain income level wellbeing is dependent on economic growth, governments may push economic activity regardless of its environmental costs in order to overcome the economic crisis.
"The global economy could suffer a deep and protracted recession as a consequence of the financial crisis," Argentine economist Alain Cibils told IPS. "As the crisis unfolds, priorities will be put on recovery for growth and employment, and controlling inflation, instead of forestalling climate change. Protecting biodiversity, aquifers and soil erosion may be seen as non-priorities."
Cibils said that the neoliberal economic model applied in Argentina, Brazil, Mexico, and other Latin American countries since the late 1980s has given priority to macroeconomic policies aimed at reducing inflation and fiscal deficits, and increasing export, regardless of social and environmental costs.
"These policies are epitomised in Argentina by intensive year-round agriculture concentrated on a couple of crops such as soybean and maize, and priority to short-term high-returns, very much as in financial globalisation," Cibils said.
The land area cultivated with soybean has more than doubled in Argentina from seven million hectares in 1997 to 16 million hectares in 2008. The land for wheat cultivation has remained constant.
"Soybean growing has taken place in Argentina at the expense of native forests," Cibils said. "Year-round agriculture has produced severe soil nutrient depletion and soil degradation, and a substantial loss of biodiversity."
Why America's Problem Is Cultural, Not Political by Stephen Gabow
Here are some questions that ask the same thing in different ways. How can McCain/Palin even stand a chance in this election, given the state of the country? Why hasn't "conservative" become a dirty word, given the results of the last 8 (or is it 30) years of conservative rule? How come the Republicans get away with lies, dirty tricks, thievery and gross hypocrisy, over and over again? Why are congressional Democrats so spineless, so deferential around Republicans?
I think the answer is that conservatives and Republicans are more attuned to the American people and to the roots of American culture. I cringe to say this, but somehow deep in our values, hopes and dreams we are primed to be conservative. And the Democrats, being politicians, can sense it; they know it in their heart of hearts.
To begin with, America has been soaked in poisonous homegrown racism for three hundred years. It affects every American child. Yet even aside from that elephant-in-the-room, we have to fight our native culture to maintain a leftist perspective.
Citizens of other countries can draw on their own revered cultural icons to promote rebellion or revolution, or the notion of a social community. In 2004 Canadians voted for "The Greatest Canadian." Tommy Douglas, a socialist and reformer known as Canada's 'father of Medicare,' won the honor. The English have Robert Owen, the French have Emile Zola, the Germans Karl Marx, among many others.
What about the USA, home of revolutionary democracy? Who do we have? Franklin Roosevelt? Joe Hill and Eugene Debs? Martin Luther King? The freedom riders? Elizabeth Staunton and Susan B. Anthony? Mario Savio? Malcolm X? John Brown? Tom Paine? Emma Goldman? With the exception of King and FDR we remember these people only vaguely, if at all. Our founding father heroes have been stripped of their revolutionary content, to emerge in our times as staunch Christian conservatives. Whether Thomas Jefferson was actually an agnostic social revolutionary is not the point; he is perceived as something else.
We love stories about poor boys making it big. Who of us has not dreamt of being a millionaire? We admire and love Bill Gates and Henry Ford by making their lives into stories of good men working hard and earning their wealth and freedom, and by excising anything negative from their stories. Our high school students know that Henry Ford built the first mass-produced automobiles, and that he offered a living wage to his workers. We don't recall, though, that Ford advocated for Hitler and published anti-Semitic crap in his Dearborn Independent.
On TV and radio we are deluged by endless get-rich-quick commercials; one salesman after another hawking his easier, faster way to make "life-changing" money. Or we peek into millionaire mansions, the "cribs" of the rich and famous, the garages full of Ferraris and Rollses. Or we watch the parade of new luxury products. Is greed really good, we wonder? Haven't too many Americans come to believe that making money in itself is a goal worthy of a lifetime's pursuit? In Thailand they talk of "suspiciously wealthy" individuals--people so rich one should be suspicious of how they got it. We have no similar concept.
Who can count the American heroes dispensing justice from their fists or from the barrel of a gun? From John Wayne to Charles Bronson, Dirty Harry to Rambo and the young Vito Corleone, we thrill to our heroes walking tall, carrying a big stick (but preferably a gun, which is much more practical) to right the wrongs of society. They do it pretty much alone. No social action to achieve social justice here.
Rambo invades Vietnam to free American prisoners. Bronson's character fights and kills the evil inner city gangs. They both avoid the incompetent government and corrupt police force. A despicable judicial bureaucracy wrongly stops Dirty Harry from dispensing real justice.
Here we have a righteous vigilante who fights for freedom, and also, of course, his beloved family. The young Michael Corleone does what is necessary to "protect his family." We want to forget he is a gangster and murderer. We want to forget Bronson's character is killing, because he is right to fight evil in any way he can.
In all this there is a strong flavor of the virtuous ends justifying the means. If you have to lie, cheat and kill to achieve the Kingdom of God on earth (the true America), so be it. Sound familiar?
When Rambo blows up a hundred Vietnamese to rescue American prisoners, we know he's only killing bad guys. Bronson's character kills and the bad guys' blood runs in the streets. No innocent victims here!
We can't cheer Rambo in the real world, but we can swear our undying love for our soldiers, somehow forgetting that their messy job involves killing innocents. And when our fighters come up with slogans straight from Rambo, like "killing is our business, and business is good," we shrug.
Americans don't vote for eggheads. I remember Adlai Stevenson running against Eisenhower. Stevenson didn't stand a chance, not least because he was pegged as too intellectual to be President. We prefer our leaders to be plain spoken, practical men who don't think or read too much. A cowboy, maybe. It is hard to think of an American icon, fictional or real, who is an intellectual. Who comes closest? Albert Einstein, Benjamin Franklin, Mark Twain?
I bet John Wayne would be a strong supporter of the Bush administration. He would cheer us on to "victory" in Iraq and Afghanistan. We'd have to respect the opinion of such an American hero. But then we forget that John Wayne was born Marion Morrison, and it is documented that he was a draft dodger during World War II.
Stephen Gabow has been an activist since the Free Speech Movement and is a physical anthropologist, and Professor Emeritus of Anthropology at San Francisco State University.
I think the answer is that conservatives and Republicans are more attuned to the American people and to the roots of American culture. I cringe to say this, but somehow deep in our values, hopes and dreams we are primed to be conservative. And the Democrats, being politicians, can sense it; they know it in their heart of hearts.
To begin with, America has been soaked in poisonous homegrown racism for three hundred years. It affects every American child. Yet even aside from that elephant-in-the-room, we have to fight our native culture to maintain a leftist perspective.
Citizens of other countries can draw on their own revered cultural icons to promote rebellion or revolution, or the notion of a social community. In 2004 Canadians voted for "The Greatest Canadian." Tommy Douglas, a socialist and reformer known as Canada's 'father of Medicare,' won the honor. The English have Robert Owen, the French have Emile Zola, the Germans Karl Marx, among many others.
What about the USA, home of revolutionary democracy? Who do we have? Franklin Roosevelt? Joe Hill and Eugene Debs? Martin Luther King? The freedom riders? Elizabeth Staunton and Susan B. Anthony? Mario Savio? Malcolm X? John Brown? Tom Paine? Emma Goldman? With the exception of King and FDR we remember these people only vaguely, if at all. Our founding father heroes have been stripped of their revolutionary content, to emerge in our times as staunch Christian conservatives. Whether Thomas Jefferson was actually an agnostic social revolutionary is not the point; he is perceived as something else.
We love stories about poor boys making it big. Who of us has not dreamt of being a millionaire? We admire and love Bill Gates and Henry Ford by making their lives into stories of good men working hard and earning their wealth and freedom, and by excising anything negative from their stories. Our high school students know that Henry Ford built the first mass-produced automobiles, and that he offered a living wage to his workers. We don't recall, though, that Ford advocated for Hitler and published anti-Semitic crap in his Dearborn Independent.
On TV and radio we are deluged by endless get-rich-quick commercials; one salesman after another hawking his easier, faster way to make "life-changing" money. Or we peek into millionaire mansions, the "cribs" of the rich and famous, the garages full of Ferraris and Rollses. Or we watch the parade of new luxury products. Is greed really good, we wonder? Haven't too many Americans come to believe that making money in itself is a goal worthy of a lifetime's pursuit? In Thailand they talk of "suspiciously wealthy" individuals--people so rich one should be suspicious of how they got it. We have no similar concept.
Who can count the American heroes dispensing justice from their fists or from the barrel of a gun? From John Wayne to Charles Bronson, Dirty Harry to Rambo and the young Vito Corleone, we thrill to our heroes walking tall, carrying a big stick (but preferably a gun, which is much more practical) to right the wrongs of society. They do it pretty much alone. No social action to achieve social justice here.
Rambo invades Vietnam to free American prisoners. Bronson's character fights and kills the evil inner city gangs. They both avoid the incompetent government and corrupt police force. A despicable judicial bureaucracy wrongly stops Dirty Harry from dispensing real justice.
Here we have a righteous vigilante who fights for freedom, and also, of course, his beloved family. The young Michael Corleone does what is necessary to "protect his family." We want to forget he is a gangster and murderer. We want to forget Bronson's character is killing, because he is right to fight evil in any way he can.
In all this there is a strong flavor of the virtuous ends justifying the means. If you have to lie, cheat and kill to achieve the Kingdom of God on earth (the true America), so be it. Sound familiar?
When Rambo blows up a hundred Vietnamese to rescue American prisoners, we know he's only killing bad guys. Bronson's character kills and the bad guys' blood runs in the streets. No innocent victims here!
We can't cheer Rambo in the real world, but we can swear our undying love for our soldiers, somehow forgetting that their messy job involves killing innocents. And when our fighters come up with slogans straight from Rambo, like "killing is our business, and business is good," we shrug.
Americans don't vote for eggheads. I remember Adlai Stevenson running against Eisenhower. Stevenson didn't stand a chance, not least because he was pegged as too intellectual to be President. We prefer our leaders to be plain spoken, practical men who don't think or read too much. A cowboy, maybe. It is hard to think of an American icon, fictional or real, who is an intellectual. Who comes closest? Albert Einstein, Benjamin Franklin, Mark Twain?
I bet John Wayne would be a strong supporter of the Bush administration. He would cheer us on to "victory" in Iraq and Afghanistan. We'd have to respect the opinion of such an American hero. But then we forget that John Wayne was born Marion Morrison, and it is documented that he was a draft dodger during World War II.
Stephen Gabow has been an activist since the Free Speech Movement and is a physical anthropologist, and Professor Emeritus of Anthropology at San Francisco State University.
This Green Subsidy for Car Makers Is Just a Disguised Corporate Bailout
Having long sabotaged eco-innovations, the motor industry is now demanding billions to cut its carbon emissions
by George Monbiot
While all eyes were fixed on the banking bail-out, a bucketload of public money was quietly sloshed into the pockets of another undeserving cause. Last week, George Bush agreed to lend $25bn to US car manufacturers. It's a soft loan, which will cost the government $7.5bn. Few people noticed; fewer fought it. The House of Representatives approved the measure by 370 votes to 58. The great corporate bail-out is spreading like the plague.
It has already crossed the Atlantic. Yesterday European car makers demanded that the EU hand them €40bn ($54bn) in cheap loans to match the US subsidy. Where will the public spending spree end?
The motor companies in both Europe and the US claim they need these loans to help them go green. They will invest the money in a new generation of environmental technologies, which will allow them to meet the efficiency standards their governments are setting. There is more joy in heaven over one sinner who repents ... but how strange this green enthusiasm seems, now that there's the smell of public money in the air. For the past 10 years the car manufacturers have driven every useful green initiative into the wall.
In 1998 European car makers promised to show that they could cut their greenhouse gases voluntarily. By the end of 2008, they pledged, they would reduce the average emissions produced by their cars from 190 grams of carbon dioxide per kilometre to 140. How well have they done? By the end of last year they had cut average pollution to 158g/km across Europe and 165g/km in the UK: they will miss their target by some 40%.
Discerning, only 10 years too late, that lobby groups' promises are worth as much as a share in Lehman Brothers, in 2006 the European commission announced that it would set compulsory standards: by 2012 all manufacturers would have to reduce their average CO2 emissions to 120g/km. It looked like progress, until you remembered that 120g was the target proposed by the EU in 1994, to be met by 2005. It was repeatedly delayed by industry lobbying.
Last year the 2012 target fell to the same forces. Angela Merkel, lobbying on behalf of companies such as DaimlerChrysler and BMW, demanded that the European commission put the brakes on. (Ironically it was Merkel, as the idealistic young German environment minister, who had first proposed the target of 120g/km by 2005.) The commission agreed to revise the figure to 130g, and to cover the gap by raising the contribution from biofuels. Since then we've seen hard evidence that most biofuels, as well as spreading starvation, produce more greenhouse gases than petrol; but the policy remains unchanged.
Now the pollutocrats are whingeing that they can't meet the 130g target either. A month ago they persuaded the European parliament's industry committee to take up their case: it proposed postponing the target until 2015, reducing the fines if they don't comply, and allowing manufacturers to offset eco-innovations against the target even if these don't actually reduce emissions. These invertebrates, in other words, proposed to grant official approval to industry greenwash. Fortunately this scam was rejected two weeks ago by the parliament's environment committee.
In the US, manufacturers have still not reached the standard (an average of 27.5 miles per gallon) that they were supposed to have met, under the Energy Policy Conservation Act, by 1985. The average car sold in the States today is less efficient than the 1908 Model T Ford.
What makes this dithering so frustrating is that to be talking, in 2008, about targets of 130 or 120g/km is a bit like discussing whether modern computers should have 10 rows of sliding beads or 100. In 1974 a stripped-down 1959 Opel T-1 managed 377 miles to the US gallon (160km/l), which equates to 15 grams of CO2 per kilometre. There is no technical reason why the maximum limit for mass-produced cars shouldn't be 50g/km.
Nor is there a good commercial reason. A poll by the Newspaper Marketing Agency shows that 80% of car buyers say economy is now more important to them than performance. The car industry's technological failure results entirely from lobbying by the companies now demanding public money to go green. They want to squeeze every last drop from existing technologies before switching to better models.
Their sabotage of green technology has been both subtle and comprehensive. The film Who Killed The Electric Car? shows how the manufacturers, working with oil companies and corrupt officials, sank California's attempt to change vehicle technologies. Having bumped off battery power, they persuaded the federal government to pour money instead into hydrogen vehicles, aware that the technological hurdles are so high that a cheap, mass-produced model might never be possible. Electric cars, by contrast, have been ready for the mass market for almost a century. The $1.2bn that the US government is spending on research and development for hydrogen cars - like the €2bn pledged to the same quest by the European Union - is a subsidy for avoiding technological change.
Now, after so much procrastination, the car makers have the flaming cheek to demand public money to pursue the policies they have spent 50 years and millions of dollars crushing. Of course, the "green loans" they are soliciting are nothing of the kind. Funding better environmental performance is simply an excuse for bailing out another failing industry. As a result of the credit crunch and high oil prices, new car registrations in the UK fell by 21% last month. In the US, sales by the major manufacturers have declined this year by between 20 and 35%.
There is no need to spend a penny of public money on greening the motor industry. As a recent report by the House of Commons environmental audit committee shows, you could achieve the same outcome by creating a bigger differential between vehicle tax bands: it proposes that people buying the least efficient cars should pay around £2,000 more per year than those buying the most efficient. This would kill the market for gas guzzlers and force the industry to make the changes it has long resisted.
But the government has taken all the flak a good tax policy would have generated for very little gain. Its controversial new vehicle tax banding will save a mere 0.16 million tonnes of CO2 per year: a drop in the acidifying ocean. At scarcely greater political cost it could have hammered emissions and generated much of the money it needs to revolutionise public transport. Again there has been a great historical slide: between 1920 and 1948 cars were taxed at £1 per horsepower: in real terms (and in some cases in nominal terms) a far higher rate for gas guzzlers than today's.
But subsidies are what governments pay when regulation doesn't happen. If you don't have the guts to force companies to do something, you must bribe them instead. It's a fair guess that European car makers will still fail to meet their environmental targets, even if they get the money they're demanding. The greenest thing governments could do is to allow these foot-dragging, planet-eating spongers to go under.
by George Monbiot
While all eyes were fixed on the banking bail-out, a bucketload of public money was quietly sloshed into the pockets of another undeserving cause. Last week, George Bush agreed to lend $25bn to US car manufacturers. It's a soft loan, which will cost the government $7.5bn. Few people noticed; fewer fought it. The House of Representatives approved the measure by 370 votes to 58. The great corporate bail-out is spreading like the plague.
It has already crossed the Atlantic. Yesterday European car makers demanded that the EU hand them €40bn ($54bn) in cheap loans to match the US subsidy. Where will the public spending spree end?
The motor companies in both Europe and the US claim they need these loans to help them go green. They will invest the money in a new generation of environmental technologies, which will allow them to meet the efficiency standards their governments are setting. There is more joy in heaven over one sinner who repents ... but how strange this green enthusiasm seems, now that there's the smell of public money in the air. For the past 10 years the car manufacturers have driven every useful green initiative into the wall.
In 1998 European car makers promised to show that they could cut their greenhouse gases voluntarily. By the end of 2008, they pledged, they would reduce the average emissions produced by their cars from 190 grams of carbon dioxide per kilometre to 140. How well have they done? By the end of last year they had cut average pollution to 158g/km across Europe and 165g/km in the UK: they will miss their target by some 40%.
Discerning, only 10 years too late, that lobby groups' promises are worth as much as a share in Lehman Brothers, in 2006 the European commission announced that it would set compulsory standards: by 2012 all manufacturers would have to reduce their average CO2 emissions to 120g/km. It looked like progress, until you remembered that 120g was the target proposed by the EU in 1994, to be met by 2005. It was repeatedly delayed by industry lobbying.
Last year the 2012 target fell to the same forces. Angela Merkel, lobbying on behalf of companies such as DaimlerChrysler and BMW, demanded that the European commission put the brakes on. (Ironically it was Merkel, as the idealistic young German environment minister, who had first proposed the target of 120g/km by 2005.) The commission agreed to revise the figure to 130g, and to cover the gap by raising the contribution from biofuels. Since then we've seen hard evidence that most biofuels, as well as spreading starvation, produce more greenhouse gases than petrol; but the policy remains unchanged.
Now the pollutocrats are whingeing that they can't meet the 130g target either. A month ago they persuaded the European parliament's industry committee to take up their case: it proposed postponing the target until 2015, reducing the fines if they don't comply, and allowing manufacturers to offset eco-innovations against the target even if these don't actually reduce emissions. These invertebrates, in other words, proposed to grant official approval to industry greenwash. Fortunately this scam was rejected two weeks ago by the parliament's environment committee.
In the US, manufacturers have still not reached the standard (an average of 27.5 miles per gallon) that they were supposed to have met, under the Energy Policy Conservation Act, by 1985. The average car sold in the States today is less efficient than the 1908 Model T Ford.
What makes this dithering so frustrating is that to be talking, in 2008, about targets of 130 or 120g/km is a bit like discussing whether modern computers should have 10 rows of sliding beads or 100. In 1974 a stripped-down 1959 Opel T-1 managed 377 miles to the US gallon (160km/l), which equates to 15 grams of CO2 per kilometre. There is no technical reason why the maximum limit for mass-produced cars shouldn't be 50g/km.
Nor is there a good commercial reason. A poll by the Newspaper Marketing Agency shows that 80% of car buyers say economy is now more important to them than performance. The car industry's technological failure results entirely from lobbying by the companies now demanding public money to go green. They want to squeeze every last drop from existing technologies before switching to better models.
Their sabotage of green technology has been both subtle and comprehensive. The film Who Killed The Electric Car? shows how the manufacturers, working with oil companies and corrupt officials, sank California's attempt to change vehicle technologies. Having bumped off battery power, they persuaded the federal government to pour money instead into hydrogen vehicles, aware that the technological hurdles are so high that a cheap, mass-produced model might never be possible. Electric cars, by contrast, have been ready for the mass market for almost a century. The $1.2bn that the US government is spending on research and development for hydrogen cars - like the €2bn pledged to the same quest by the European Union - is a subsidy for avoiding technological change.
Now, after so much procrastination, the car makers have the flaming cheek to demand public money to pursue the policies they have spent 50 years and millions of dollars crushing. Of course, the "green loans" they are soliciting are nothing of the kind. Funding better environmental performance is simply an excuse for bailing out another failing industry. As a result of the credit crunch and high oil prices, new car registrations in the UK fell by 21% last month. In the US, sales by the major manufacturers have declined this year by between 20 and 35%.
There is no need to spend a penny of public money on greening the motor industry. As a recent report by the House of Commons environmental audit committee shows, you could achieve the same outcome by creating a bigger differential between vehicle tax bands: it proposes that people buying the least efficient cars should pay around £2,000 more per year than those buying the most efficient. This would kill the market for gas guzzlers and force the industry to make the changes it has long resisted.
But the government has taken all the flak a good tax policy would have generated for very little gain. Its controversial new vehicle tax banding will save a mere 0.16 million tonnes of CO2 per year: a drop in the acidifying ocean. At scarcely greater political cost it could have hammered emissions and generated much of the money it needs to revolutionise public transport. Again there has been a great historical slide: between 1920 and 1948 cars were taxed at £1 per horsepower: in real terms (and in some cases in nominal terms) a far higher rate for gas guzzlers than today's.
But subsidies are what governments pay when regulation doesn't happen. If you don't have the guts to force companies to do something, you must bribe them instead. It's a fair guess that European car makers will still fail to meet their environmental targets, even if they get the money they're demanding. The greenest thing governments could do is to allow these foot-dragging, planet-eating spongers to go under.
Howard M. Wachtel: Some lessons from John Maynard Keynes’ treatise on the Great Depression.
In the midst of the Great Depression in 1935, John Maynard Keynes published The General Theory of Employment, Interest, and Money – his monumental contribution to 20th century political economy. However, if you studied at a major American university graduate program in economics in the past two decades you would probably not have even heard of Keynes and certainly would not have studied his General Theory. This is a gross failure of contemporary economics, because Keynes has direct relevance today.
Take one issue – interest rates. The U.S. Federal Reserve’s policy of lowering interest rates, from 5 and 1/4% in August 2007 to 2% in May 2008, was a grave mistake that could have been avoided if Keynes’ analysis had been part of the Fed’s policy making knowledge. The Fed’s error in interest rate policy was compounded when it followed interest rate reductions that did not work with large infusions of new money into the financial system.
Keynes taught us that when banks and other holders of vast sums of capital have what he called a “preference for liquidity” – a desire to hold cash and not invest it – lowering interest rates will not unlock this liquidity for investment. Instead any infusions of new money by the central bank into the system will simply be stashed away for two reasons: first, the mood of the financial market’s psychology is glum and not conducive to investment because rates of return are perceived to be too low. Second, new money injected will be held as cash in anticipation of a better day, so the new money will be seen as an arsenal to be held until markets improve.
Added to this is the character of this most recent bubble – inflated home prices and their accompanying high-risk financial instruments to insure these bad loans. Lowering interest rates simply poured fuel on the fire by keeping loan rates low, encouraging more imprudent lending and borrowing, and furthering the speculative bubble’s chain of bad debts.
This reasoning is counter-intuitive, but it fits the current paradox of lower interest rates and unprecedented chunks of cash interventions without their anticipated impact. The preference to hoard money by banks reinforced a psychological condition that was confirmed by the failure of the lower interest rates to have their intended effect. Credit markets in today’s language have frozen.
Keynes called this the liquidity trap – the most difficult position for an economy, one that characterized the Japanese economy in the 1990s, and threatens to engulf not only the U.S. but the global economy today.
Take one issue – interest rates. The U.S. Federal Reserve’s policy of lowering interest rates, from 5 and 1/4% in August 2007 to 2% in May 2008, was a grave mistake that could have been avoided if Keynes’ analysis had been part of the Fed’s policy making knowledge. The Fed’s error in interest rate policy was compounded when it followed interest rate reductions that did not work with large infusions of new money into the financial system.
Keynes taught us that when banks and other holders of vast sums of capital have what he called a “preference for liquidity” – a desire to hold cash and not invest it – lowering interest rates will not unlock this liquidity for investment. Instead any infusions of new money by the central bank into the system will simply be stashed away for two reasons: first, the mood of the financial market’s psychology is glum and not conducive to investment because rates of return are perceived to be too low. Second, new money injected will be held as cash in anticipation of a better day, so the new money will be seen as an arsenal to be held until markets improve.
Added to this is the character of this most recent bubble – inflated home prices and their accompanying high-risk financial instruments to insure these bad loans. Lowering interest rates simply poured fuel on the fire by keeping loan rates low, encouraging more imprudent lending and borrowing, and furthering the speculative bubble’s chain of bad debts.
This reasoning is counter-intuitive, but it fits the current paradox of lower interest rates and unprecedented chunks of cash interventions without their anticipated impact. The preference to hoard money by banks reinforced a psychological condition that was confirmed by the failure of the lower interest rates to have their intended effect. Credit markets in today’s language have frozen.
Keynes called this the liquidity trap – the most difficult position for an economy, one that characterized the Japanese economy in the 1990s, and threatens to engulf not only the U.S. but the global economy today.
United Nations Conference on Trade and Development: The Crisis of a Century.
As the financial crisis continues its evolution at dizzying speed, the business model underlying a growing share of financial sector activity has been increasingly discredited. This policy brief suggests that a considerable degree of public intervention is required to avoid greater damage to the financial system and the real economy. It is also imperative to strengthen regulation and increase the transparency of financial instruments and institutions. Overall, macroeconomic policy should aim at avoiding a global recession or even depression. Ultimately, deflation and not inflation may be the main economic policy challenge.
The Crisis of a Century
Starbucks Wastes Millions of Litres of Water A Day
Coffee giant's running-tap policy contradicts its claimed green credentials
by Angela Balakrishnan
Environmental campaigners have attacked Starbucks after the discovery that millions of litres of water are wasted in its coffee shops every day, contradicting its much-boasted green credentials.
[Starbucks signs are seen outside one of its stores in New York July 3, 2008. (Chip East/Reuters)]Starbucks signs are seen outside one of its stores in New York July 3, 2008. (Chip East/Reuters)
An investigation by the Sun revealed that over 23.4m litres of water are poured down the drains of 10,000 outlets worldwide due to a policy of keeping a tap running non-stop.
It is enough daily water for the entire 2 million population of Namibia in Africa, which has severe droughts, or to fill an Olympic pool every 83 minutes.
A single Starbucks tap left running for just over three minutes wastes the amount of water one African needs to survive for a day in drought conditions.
Each Starbucks has a cold tap behind the counter that runs into a sink known as a "dipper well" - used to wash utensils.
Under the company's health and safety rules, staff are banned from turning the water off because management claim that a constant flow of water prevents germs breeding in taps.
Water companies joined green activists in criticising the firm for harming the environment and wasting a vital natural resource. Experts said leaving taps running for hygiene reasons was "nonsense".
Water shortage is one of the world's biggest problems. Australia is in the grip of a seven-year drought - the worst in a century.
In the UK, Starbucks has 698 branches, each open for 13 hours a day. Even a slow tap flows three litres of water a minute, meaning Starbucks in the UK is wasting an estimated 1.63m litres a day - enough to supply Matlock village in Derbyshire.
The running water policy was revealed after a Starbucks executive wrote back to a couple who complained about the tap at their local branch.
Lisa Woolfe, 39, of Cuffley, Hertfordshire, said: "I noticed a small sink behind the counter had its tap running. The assistant said the store was told to keep it running as it cleaned the pipes.
"I could not believe it but when we contacted head office, they confirmed the taps were left on and the water was not recycled.
"It is an absolutely astonishing waste of water, especially for a company which prides itself on its green credentials."
Speaking to staff at Starbucks outlets around the world, the Sun found that many did not use the running tap or even know what it was for.
Peter Robinson, of the environmental charity Waste Watch, said: "Leaving taps running all day is a shocking waste of precious water. And to claim you are doing it for health and safety reasons is bonkers.
"Tap water comes from rivers and groundwater and wasting it can cause great harm to the environment and wildlife. Big companies should set an example."
Jacob Tompkins, of the independent water efficiency agency Water Wise, said: "If they are doing all their basic cleaning procedures, I fail to see why they would need to do this. There are a lot of other ways to stop a build-up of bacteria.
"The chance of a build-up in the spout is extremely remote. And if there is one they're not cleaning the tap properly."
Ian Barker, the head of water resources at the Environment Agency, said: "We are already taking too much water from the environment and are seeing reduced river flows."
A spokeswoman for Starbucks said that the company's water use adhered to the World Health Organisation, US and EU environmental directives for in-store water supply standards. But she acknowledged the company could cut its water use.
She defended its dipper well system, saying the technique was common and accepted in the industry.
"Starbucks' challenge is to balance water conservation with the need for customer safety," the spokeswoman said. "The dipper well system currently in use in Starbucks retail stores ensures that we meet or exceed our own and local health standards."
She said the company had tested alternative methods such as the use of an ice bath but it was not successful. It was considering other alternatives and cut its water use per square foot this year.
Starbucks is known for its campaigns and instore advertising boasting how it gives back to communities and the environment.
In the company's latest corporate social responsibility report, it says: "From promoting conservation in coffee-growing countries to in-store 'green teams' and recycling programs, Starbucks has established high standards for environmental responsibility.
"By taking steps to reduce waste from our operations and recycle, we can preserve the Earth's natural resources and enhance the quality of lives around the globe.
"Starbucks actively seeks opportunities to minimise our environmental impact."
This is not the first time the Seattle-based firm has come under fire over its social and environmental credentials. In 2006, the Guardian reported how the US coffee giant has used its muscle to block an attempt by Ethiopia's farmers to copyright their most famous coffee bean types, denying them potential earnings of up to £47m a year.
As a result, Starbucks negotiated an agreement with the Ethiopian government to give the country more ownership and a better price for its coffee beans.
by Angela Balakrishnan
Environmental campaigners have attacked Starbucks after the discovery that millions of litres of water are wasted in its coffee shops every day, contradicting its much-boasted green credentials.
[Starbucks signs are seen outside one of its stores in New York July 3, 2008. (Chip East/Reuters)]Starbucks signs are seen outside one of its stores in New York July 3, 2008. (Chip East/Reuters)
An investigation by the Sun revealed that over 23.4m litres of water are poured down the drains of 10,000 outlets worldwide due to a policy of keeping a tap running non-stop.
It is enough daily water for the entire 2 million population of Namibia in Africa, which has severe droughts, or to fill an Olympic pool every 83 minutes.
A single Starbucks tap left running for just over three minutes wastes the amount of water one African needs to survive for a day in drought conditions.
Each Starbucks has a cold tap behind the counter that runs into a sink known as a "dipper well" - used to wash utensils.
Under the company's health and safety rules, staff are banned from turning the water off because management claim that a constant flow of water prevents germs breeding in taps.
Water companies joined green activists in criticising the firm for harming the environment and wasting a vital natural resource. Experts said leaving taps running for hygiene reasons was "nonsense".
Water shortage is one of the world's biggest problems. Australia is in the grip of a seven-year drought - the worst in a century.
In the UK, Starbucks has 698 branches, each open for 13 hours a day. Even a slow tap flows three litres of water a minute, meaning Starbucks in the UK is wasting an estimated 1.63m litres a day - enough to supply Matlock village in Derbyshire.
The running water policy was revealed after a Starbucks executive wrote back to a couple who complained about the tap at their local branch.
Lisa Woolfe, 39, of Cuffley, Hertfordshire, said: "I noticed a small sink behind the counter had its tap running. The assistant said the store was told to keep it running as it cleaned the pipes.
"I could not believe it but when we contacted head office, they confirmed the taps were left on and the water was not recycled.
"It is an absolutely astonishing waste of water, especially for a company which prides itself on its green credentials."
Speaking to staff at Starbucks outlets around the world, the Sun found that many did not use the running tap or even know what it was for.
Peter Robinson, of the environmental charity Waste Watch, said: "Leaving taps running all day is a shocking waste of precious water. And to claim you are doing it for health and safety reasons is bonkers.
"Tap water comes from rivers and groundwater and wasting it can cause great harm to the environment and wildlife. Big companies should set an example."
Jacob Tompkins, of the independent water efficiency agency Water Wise, said: "If they are doing all their basic cleaning procedures, I fail to see why they would need to do this. There are a lot of other ways to stop a build-up of bacteria.
"The chance of a build-up in the spout is extremely remote. And if there is one they're not cleaning the tap properly."
Ian Barker, the head of water resources at the Environment Agency, said: "We are already taking too much water from the environment and are seeing reduced river flows."
A spokeswoman for Starbucks said that the company's water use adhered to the World Health Organisation, US and EU environmental directives for in-store water supply standards. But she acknowledged the company could cut its water use.
She defended its dipper well system, saying the technique was common and accepted in the industry.
"Starbucks' challenge is to balance water conservation with the need for customer safety," the spokeswoman said. "The dipper well system currently in use in Starbucks retail stores ensures that we meet or exceed our own and local health standards."
She said the company had tested alternative methods such as the use of an ice bath but it was not successful. It was considering other alternatives and cut its water use per square foot this year.
Starbucks is known for its campaigns and instore advertising boasting how it gives back to communities and the environment.
In the company's latest corporate social responsibility report, it says: "From promoting conservation in coffee-growing countries to in-store 'green teams' and recycling programs, Starbucks has established high standards for environmental responsibility.
"By taking steps to reduce waste from our operations and recycle, we can preserve the Earth's natural resources and enhance the quality of lives around the globe.
"Starbucks actively seeks opportunities to minimise our environmental impact."
This is not the first time the Seattle-based firm has come under fire over its social and environmental credentials. In 2006, the Guardian reported how the US coffee giant has used its muscle to block an attempt by Ethiopia's farmers to copyright their most famous coffee bean types, denying them potential earnings of up to £47m a year.
As a result, Starbucks negotiated an agreement with the Ethiopian government to give the country more ownership and a better price for its coffee beans.
Finanskrisen var fuldkommen forudsigelig
Det overrasker, at den nuværende finanskrise kan komme bag på nogen. Den har været forudsagt i 10 år. Og en endnu større krise venter os inden for de næste fem år.
Informations artikel »Alle spørger hvordan kunne det ske?«, som blev bragt 27-28.september fik mig op af stolen, fordi krisen var fuldstændig forudsigelig. Den blev forudsagt af blandt andre undertegnede for ca. 10 år siden. Og jeg var ikke den eneste. Andre, der har forstand på international finans, har også advaret mod udviklingen, bl.a. George Soros og David Korten.
I 25 år har jeg arbejdet med international finans og været rådgiver for en række banker, forsikringsselskaber, pensionsfonde, m.m., som nu er i store vanskeligheder. Mine erfaringer var baggrunden for min advarsel om en kommende økonomisk nedsmeltning. Lad os begynde med årsagen til den nuværende krise i USA.
Den mest almindelige forklaring, som næsten alle iagttagere nævner, er boligmarkedet, specielt udstedelsen af de såkalde ’subprime’ lån af tvivlsom lødighed.
Men at give subprime lånene skylden for krisen i USA svarer til at give en bakterieinfektion skylden for et AIDS offers død. AIDS ødelægger immunsystemet og udsætter kroppen for en række sygdomme, som alle kunne være den direkte dødsårsag.
Flokmentaliteten styrer
Problemet med det globale finansielle system går langt dybere end til subprime lånene. Det er et systemisk problem på linje med svigt af autoimmun systemet hos mennesker. Finanssystemet er simpelhen skrøbeligt, og på vej mod dets endelige død.
I min bog, I fuld gang (Hovedland 1999), definerede jeg hovedproblemet som »aktionær protektionisme«, men i den engelske version af bogen gik jeg mere i dybden da jeg skrev: »Globalisering er en finansiel katastrofe der bare venter på at ske. Det eneste spørgsmål er hvornår. Det grundlæggende problem kan forstås gennem
følgende seks aspekter:
•Frie kapitalbevægelser over grænserne
•Koncentration af hundreder af billioner dollar i hænderne på få store spillere, der leder efter kortsigtet profit.
•Mangel på likviditet på mange af de markeder, der tiltrækker pengene.
•Flokmentaliteten hos disse investorer.
•Markedernes indbyrdes afhængighed
•Et systemisk behov for at øge risikoen i de speculative investeringer efterhånden i trit med at mulighederne for let profit formindskes.«
En større krise på vej
Den aktuelle krise er drevet hovedsageligt af den udbredte ’grådighed er god’-mentalitet hos topledere i finans og industri. De er mere interesserede i deres personlige bundlinje end i deres ansattes, aktionærers og lokalsamfunds. De tager således enorme risici på vegne af andre, som ender med at betale regningerne.
Men en endnu større krise venter os forude, sandsynligvis inden for fem år, men timingen er usikker. Den næste nedtur vil blive udløst af finansmarkedets erkendelse af alvoren i det såkaldte ’peak oil’-problem, det vil sige det tidspunkt, hvor olieproduktionen topper og går permanent ned med omkring tre pct. om året (fra ca. 2011-2012). Efterspørgslen efter olie vil fortsætte med at stige, bl.a. på grund af Indien og Kina, og oliepriserne vil derfor eksplodere på en måde vi ikke har set før.
’Lokalisering’
Nedgangen i olieproduktion er helt forudsigelig ifølge olie-geologer, hvis hidtidige forudsigelser over 30 år har været uangribelige. De forfærdende konsekvenser af dette fænomen for vores daglige liv overalt er endnu ikke trængt ind i politikernes og finansmarkedernes overoptimistiske bevidsthed. (De to er tæt forbundne). Når det begynder at dæmre vil tingene ske meget hurtigt med panikudsalg af alt, når finansspekulanterne alle styrter mod udgangen på samme tid – jvf. flokmentaliteten. Ødelæggelsen af den virkelige økonomi vil blive irreversibel. Vi vil gå ind i en periode med verdensomspændende negativ vækst på grund af udtømmning af den primære drivkraft bag vores økonomiske vækst i de sidste 150 år: billig olie – uden noget sammenligneligt substitut i syne.
Den gode nyhed er, at ud af dette kaos og enorme lidelser over hele jorden vil der opstå en global civilisation, der er mere på linje med menneskers virkelige behov end finansmarkedernes behov – en udvikling som jeg har kaldt: »lokalisering« eller »an ecovillage future«. Men det er en helt anden historie, som jeg også har skrevet en del om, og som mange over hele verden allerede nu er i gang med at forberede.
Ross Jackson er ph.d. i økonomi (operationsanalyse) og forfatter. Han var selvstandig konsulent i international finans og valutamarkedet i mange år. Ross Jackson er medstifter/formand for den almennyttige forening Gaia Trust og hovedaktionær i Urtekram A/S
Informations artikel »Alle spørger hvordan kunne det ske?«, som blev bragt 27-28.september fik mig op af stolen, fordi krisen var fuldstændig forudsigelig. Den blev forudsagt af blandt andre undertegnede for ca. 10 år siden. Og jeg var ikke den eneste. Andre, der har forstand på international finans, har også advaret mod udviklingen, bl.a. George Soros og David Korten.
I 25 år har jeg arbejdet med international finans og været rådgiver for en række banker, forsikringsselskaber, pensionsfonde, m.m., som nu er i store vanskeligheder. Mine erfaringer var baggrunden for min advarsel om en kommende økonomisk nedsmeltning. Lad os begynde med årsagen til den nuværende krise i USA.
Den mest almindelige forklaring, som næsten alle iagttagere nævner, er boligmarkedet, specielt udstedelsen af de såkalde ’subprime’ lån af tvivlsom lødighed.
Men at give subprime lånene skylden for krisen i USA svarer til at give en bakterieinfektion skylden for et AIDS offers død. AIDS ødelægger immunsystemet og udsætter kroppen for en række sygdomme, som alle kunne være den direkte dødsårsag.
Flokmentaliteten styrer
Problemet med det globale finansielle system går langt dybere end til subprime lånene. Det er et systemisk problem på linje med svigt af autoimmun systemet hos mennesker. Finanssystemet er simpelhen skrøbeligt, og på vej mod dets endelige død.
I min bog, I fuld gang (Hovedland 1999), definerede jeg hovedproblemet som »aktionær protektionisme«, men i den engelske version af bogen gik jeg mere i dybden da jeg skrev: »Globalisering er en finansiel katastrofe der bare venter på at ske. Det eneste spørgsmål er hvornår. Det grundlæggende problem kan forstås gennem
følgende seks aspekter:
•Frie kapitalbevægelser over grænserne
•Koncentration af hundreder af billioner dollar i hænderne på få store spillere, der leder efter kortsigtet profit.
•Mangel på likviditet på mange af de markeder, der tiltrækker pengene.
•Flokmentaliteten hos disse investorer.
•Markedernes indbyrdes afhængighed
•Et systemisk behov for at øge risikoen i de speculative investeringer efterhånden i trit med at mulighederne for let profit formindskes.«
En større krise på vej
Den aktuelle krise er drevet hovedsageligt af den udbredte ’grådighed er god’-mentalitet hos topledere i finans og industri. De er mere interesserede i deres personlige bundlinje end i deres ansattes, aktionærers og lokalsamfunds. De tager således enorme risici på vegne af andre, som ender med at betale regningerne.
Men en endnu større krise venter os forude, sandsynligvis inden for fem år, men timingen er usikker. Den næste nedtur vil blive udløst af finansmarkedets erkendelse af alvoren i det såkaldte ’peak oil’-problem, det vil sige det tidspunkt, hvor olieproduktionen topper og går permanent ned med omkring tre pct. om året (fra ca. 2011-2012). Efterspørgslen efter olie vil fortsætte med at stige, bl.a. på grund af Indien og Kina, og oliepriserne vil derfor eksplodere på en måde vi ikke har set før.
’Lokalisering’
Nedgangen i olieproduktion er helt forudsigelig ifølge olie-geologer, hvis hidtidige forudsigelser over 30 år har været uangribelige. De forfærdende konsekvenser af dette fænomen for vores daglige liv overalt er endnu ikke trængt ind i politikernes og finansmarkedernes overoptimistiske bevidsthed. (De to er tæt forbundne). Når det begynder at dæmre vil tingene ske meget hurtigt med panikudsalg af alt, når finansspekulanterne alle styrter mod udgangen på samme tid – jvf. flokmentaliteten. Ødelæggelsen af den virkelige økonomi vil blive irreversibel. Vi vil gå ind i en periode med verdensomspændende negativ vækst på grund af udtømmning af den primære drivkraft bag vores økonomiske vækst i de sidste 150 år: billig olie – uden noget sammenligneligt substitut i syne.
Den gode nyhed er, at ud af dette kaos og enorme lidelser over hele jorden vil der opstå en global civilisation, der er mere på linje med menneskers virkelige behov end finansmarkedernes behov – en udvikling som jeg har kaldt: »lokalisering« eller »an ecovillage future«. Men det er en helt anden historie, som jeg også har skrevet en del om, og som mange over hele verden allerede nu er i gang med at forberede.
Ross Jackson er ph.d. i økonomi (operationsanalyse) og forfatter. Han var selvstandig konsulent i international finans og valutamarkedet i mange år. Ross Jackson er medstifter/formand for den almennyttige forening Gaia Trust og hovedaktionær i Urtekram A/S
Capitalism Reaches a Crossroads
'Even now, someone somewhere is penning a book with a snappy title The End of Capitalism,' columnist Philip Stephens, associate editor of the Financial Times wrote recently. Not to worry, he continued, that's not about to happen. However, eight days earlier Martin Wolf, associate editor and chief economics commentator at the same paper observed that what was 'until recently, the brave new financial system is melting away before our eyes.' On the night of September 18 members of Congress were summoned to a Capitol Hill conference room where they were told that if they did not act quickly to approve a radical revamp of how the government deals with the economy, capitalism might indeed collapse. That's before President George W. Bush said, 'If money isn't loosened up, this sucker could go down.'
Not to worry, cautioned the editor of the conservative German newspaper Die Weit. 'These are all trials and crises, but they will not spell the end of America's distinctiveness.'
'The country will never convert to socialism, nor will it become a mega-state. Faced with similar circumstances, that might be the response of the pessimistic Europeans. America's culture of optimism - which all too often gets on the Europeans' nerves because they consider it to be naïve and superficial - also has the power to identify a setback as exactly that and not the end of the world,' the paper editorialized. That was a few days before the U.S. Treasury took responsibility for the well-being of distressed financial institutions all over the world.
No, the U.S. is not about to become socialist any time too soon. That alternative has not been placed before the public in a way that could be considered preferable to what we've got. Besides, a system ceases to be when it is replaced by something else. But with each passing day, as the crisis has deepened, it has become more and more obvious that 'unfettered' capitalism and 'market fundamentalism' and the neo-liberal policies they produce are discredited. Indeed, most of the world had rejected them before the current crisis began.
'The globalization agenda has been closely linked with the market fundamentalists - the ideology of free markets and financial liberalization,' economist Joseph Stiglitz told Nathan Gardels on the Huffington Post recently. 'In this crisis, we see the most market- oriented institutions in the most market-oriented economy failing and running to the government for help.' Everyone in the world will say now that this is the end of market fundamentalism.
'In this sense, the fall of Wall Street is for market fundamentalism what the fall of the Berlin Wall was for communism - it tells the world that this way of economic organization turns out not to be sustainable,' said Stiglitz. 'In the end, everyone says, that model doesn't work. This moment is a marker that the claims of financial market liberalization were bogus.'
Conservative commentator and political operative, Newt Gingrich, has come up with the terms 'crony capitalism' and 'bureaucratic capitalism,' both of which he says will be the outcome of the Bush Administration's bailout scheme. The former will mean 'a welfare state for rich investors,' he says, the latter 'salary caps and other government regulatory requirements which would drive the `private' out of `private enterprise'.'
There's a lot of talk out there about the bailout being 'socialism for the rich.' That's all so much seemingly clever rhetoric designed to make a political point, but of no substance. Nothing the Bush Administration is pushing (with the help of a Democratic Congress) bears any resemblance to anything that could remotely be called socialism. In fact, it looks far more like Italy under Mussolini than the USSR under Brezhnev. As truthdig.com columnist Robert Sheer noted last week, 'what is proposed is not the nationalization of private corporations but rather a corporate takeover of government. The marriage of highly concentrated corporate power with an authoritarian state that services the politico-economic elite at the expense of the people is more accurately referred to as `financial fascism'.'
The new Treasury Department fund 'will share many characteristics of the expanding government-sponsored pools known as sovereign funds,' wrote Landon Thomas, Jr. in the New York Times September 23.
'The new fund, assuming it is approved by Congress, could pull the United States deeper into a form of capitalism in which the most powerful financial entities are not risk-happy investment banks, but more cautious state-sponsored entities,' wrote Thomas. 'While not necessarily a third economic way, this general approach presumes that the government - in addition to the private sector - plays a crucial role in deciding how best to deploy a nation's investment capital.'
'This gets to the point of state capitalism and defining what the role of the government is in a free- market economy,' Douglas Rediker, a former investment banker at the New America Foundation in Washington, told Thomas.
'The result of the bailout would be that the government would virtually control many of the largest financial institutions in the country,' wrote Dan La Botz in Monthly Review online. 'The U.S. government and the banks of the country would suddenly be fused - or perhaps entangled would be a better word - into one extremely powerful political-economic entity. While the proposal does not envision state control of the economy as a long-term proposition, merely long enough to save the bankers, still the impact of the current proposals now being debated in Congress will be far-reaching. The American government and the people have suddenly found themselves at a turning point which was not foreseen and for which no one was prepared.'
'If you wanted to devise a name for this approach, you might pick the phrase economist Arnold Kling has used: Progressive Corporatism.,' wrote Times columnist David Brooks the same day. 'We're not entering a phase in which government stands back and lets the chips fall. We're not entering an era when the government pounds the powerful on behalf of the people. We're entering an era of the educated establishment, in which government acts to create a stable - and often oligarchic - framework for capitalist endeavor.'
'After a liberal era and then a conservative era, we're getting a glimpse of what comes next,' wrote Brooks
I can hardy wait.
An inevitable consequence of globalization is that many of the critical problems facing the planet today can only be solved through international cooperation and coordination. These include: climate change and other threats to the biosphere, aids and other infectious diseases, human migration and international finance.
The current economic crisis is an international one yet the recourse chosen by Washington to deal with it globally is to 'press' other countries to adopt measures similar to those adopted in the U.S. Under such circumstances the chance of a collective effort to restructure world capitalism would seem remote, if possible. But the demand for such is out there and how our country responds will go a long way in determining the contours of international affairs for decades to come. One has only to grasp the nature of the remarks at the recent opening of the United National General Assembly to appreciate the seriousness of the challenge.
Last week in New York, one after another, heads-of- state rose to the Assembly rostrum to drive home the message: the 'credit crunch' in the U.S. is much more than a crisis in U.S. banking; it reflects a problem threatening economic devastation across the globe. It requires an international cooperative effort in which diktat, posing as 'leadership', cannot be tolerated. Don't even think about handing the problem to the World Bank or the International Monetary Fund. The UN itself should be the arena for countries to discuss a solution for the global financial crisis, said Brazil's President, Luiz Inacio Lula da Silva: 'The global nature of this crisis means that the solutions we adopt must also be global, and decided upon within legitimate, trusted multilateral forum, with no impositions.'
Arguably some of the strongest remarks to the UN came from the leaders of Latin American countries but the most fundamental challenges came from traditional U.S. allies such as France and Germany. These are capitalist countries and for the foreseeable future will remain so. But they have a strikingly different view of how the international economy should function.
German chancellor, Angela Merkel, even revealed that an attempt had been made to enlist Washington in a collective effort to head off the crisis. At last year's meeting of the major industrial powers, she said, she had - in the world of the New York Times - 'strongly urged both the United States and Britain to be more rigorous in supervising financial activities, and even offered specific proposals to be applied to banks and other institutions.' But the U.S. was unresponsive, she said, while seeming 'to express a certain exasperation that the United States was now asking Europe for help, after inflicting damage on the rest of the world that could have been avoided.'
'At the moment, I don't think Japan needs to launch a program similar to that of the United States,' Japanese Vice Finance Minister Kazuyuki Sugimoto told reporters in Tokyo, while the European Union let it be known that its members would not be putting up money to rescue banks. 'This crisis originated in the
US and is mainly hitting the US,' German Finance Minister Steinbeck said last week. In Europe and Germany, such a package would be 'neither sensible nor necessary.'
The U.S. 'has not only turned away from decades of rhetoric about the virtues of the free market and the dangers of government intervention, but it has also probably undercut future American efforts to promote such policies abroad,' wrote the New York Times' Nelson Schwartz from Paris September 18. And most of the other governments are none to happy about it. Japanese commentators were quick to note that the Treasury bailout is precisely what Washington told them not to try when that country faced an economic crisis only a few years ago. (A condition of help for South Korea when it faced an economic crisis in the 90s was that Seoul not bail out banks and other failing enterprises.)
Last Friday, editors of the center-right German newspaper Allegemeine Zeitung compared the U.S. financial crisis to 911 saying 'this time, the attack on all-American doctrines is not the work of some foreign enemy. It comes from within, from the depths of the system. Largely unobstructed by its own state controls, American capitalism has created its own suicide bomber whose explosives - derivatives - have had an even greater effect than the flying bombs of the jihadists. The whole world - and not just New York - has a new ground zero now - Wall Street.'
French political leaders immediately seized on the latest bailout moves to trumpet their own version of 'economic patriotism.' 'We're not going to accept to pay for the broken dishes of a failed regulation' and a 'corruption of capitalism,' said French Prime Minister Francois Fillon. Nicolas Sarkozy has called for a world to 'learn the lessons of the worst financial crisis since the 1930s.' He proposed to 'moralize' capitalism, freeing it from speculators whom he labeled 'the new terrorists.' Last week, as President Bush went on television to admit the crisis is grave, Sarkozy stoutly defended capitalism but observed that 'A certain idea of globalization is drawing to a close with the end of a financial capitalism that had imposed its logic on the whole economy and contributed to perverting it.'
'The crisis is not a crisis of capitalism,' said Sarkozy. 'It is the crisis of a system that is far from the values of capitalism and betrayed capitalism.'
In 2006, long before there was any acknowledgement of the chaos to come (I put it that way because working people in the U.S. were already facing home foreclosures),when the world's elite gathered at Davos, Switzerland, chancellor Merkel had observed that 'What we have is a completely new balance of power in the world today.'
That too was evident in the General Assembly debate. In prior years no one would have expected Latin American governments to openly challenge Washington and Wall Street's conduct in the international economy. However, over a brief recent period, left-leaning political forces have taken power electorally in a number of countries, having in common a rejection of the exploitative policies of the World Bank and IMF, and the influence of the same 'market fundamentalists' that the Asians are repulsing and who have led the U.S., itself, into the present economic cul-de-sac.
No one was surprised that Cuban first vice-president Jose Ramon Machado Ventura would tell the UN that the drive for profits was increasing poverty and that the current crisis threatened the 'existence of mankind.' 'Fabulous fortunes cannot be wasted while millions are starving and dying of curable diseases,' he said. 'For a large part of the non-aligned nations, the situation is becoming unsustainable. Our nations have paid and will continue to pay the cost and consequences of the irrationality, wastefulness and speculation of a few countries in the...north.'
'The prevailing world order, unjust and uncontained, must be replaced,' Machado Ventura said.
'We don't want to conceive of the idea that the rescue of the dignity of the world's poor does not have the same priority or the same urgency of saving the institutions that operate the most powerful financial centre in the world,' said Dominican Republic president Leonel Fernandez. 'We need an international financial plan that is as urgent and as bold as the one to save Freddie Mac, Fannie Mae, Bear Stearns, Merrill Lynch and American International Group.' Fernandez added that while $700 billion is being set aside to rescue U.S. financial institutions, for something like $50 billion millions around the world could be spared a miserable existence.
'We're not going to accept to pay for the broken dishes of a failed regulation' and a 'corruption of capitalism,' said French Prime Minister Francois Fillon. Sarkozy called for a world to 'learn the lessons of the worst financial crisis since the 1930s.' 'Let's create a regulated capitalism,' he said.
On September 24 in Berlin, German Finance Steinbruck repeated Merkel's charge that Washington had, last year, resisted specific calls for regulations in the financial marketplace. 'Crisis management alone will not rebuild the lost confidence,' he said. 'We must civilize financial markets, and not just through moral appeals against excess and speculation. Self-regulation is no longer sufficient.' The US belief in 'laisser- faire capitalism; the notion that markets should be as free as possible from regulation; these arguments were wrong and dangerous,' he said. 'This largely under- regulated system is collapsing today.'
Steinbeck went on to propose new regulations and said that amid the current economic crisis the US is poised to lose its role as a global financial 'superpower.' The new world will become 'multipolar' with the emergence of stronger, better capitalized centers in Asia and Europe, he said.
Meanwhile, Oskar Lafontaine, leader of Germany's fast growing and increasingly influential Left Party, said the world is confronted with more than a banking or economic crisis and - in the words of Der Spiegel - 'but rather one of the entire intellectual and moral direction of Western society.' 'We no longer have a social market economy because of the regimes of the international financial markets,' Lafontaine said the consequence of which is increased privatization of the social services and a threat to the retirement security of millions of people. Lafontaine said the Left party wants the re-creation of a Bretton Woods-style system of foreign exchange controls with fixed trading bands, controls on international capital flows and on financial products.
'We believe that financial products should be forced to get official stamps of approval just like pharmaceutical products,' Lafontaine, the former head of the country's Social Democratic Party, said. 'Because the bitter truth is that many extremely greedy bankers don't even understand themselves what they've done. These are people who started something without knowing what they were doing and it's ended in disaster.'
'When enough banks have been nationalized or gone bust, when the last reputations have been properly shredded, and when prices of Fifth Avenue apartments and Mayfair town houses have fallen finally to earth, politicians are going to have to think hard about the lessons of the financial crash of 2008,' wrote Stephens of the Financial Times. 'Even now, someone somewhere is penning The End of Capitalism. Experience tells us snappy book titles should be treated with caution. The global financial system will never be the same again. But just as history survived the collapse of communism, so the market economy will weather the demise of Bear Stearns, Lehman, Merrill Lynch and HBOS.'
'The credit crunch and the financial firestorm have also provided a neat metaphor for the big shift in economic power in the world,' writes Stephens. He goes on to endorse the call for 'more global governance: credible international rules.'
'Capitalism will survive these financial shocks,' said Stephens. Probably it will; in any case it's good to have faith.
On Monday, the House of Representatives voted down the final draft of the bailout plan hurriedly crafted by the Administration and Congressional leaders from the two major parties. This set the stage for what was certain to be desperate attempts to put together a compromise that could win legislative approval. This takes place against a backdrop of widespread public opposition to the original plan and ever greater turmoil in the foreign money markets and on Wall Street.
Meanwhile, the dangers and challenges over the next few weeks and months are enormous. On the world scene, the U.S. could join in an international - and more democratic - effort at reconstructing capitalism in an effort to save it, or the White House - whoever lives there - and the Congress could lead us along a path of international isolation in which the rest of the world goes about its business, leaving us in economic mire. On the home front, the policymakers could enshrine a new form of corporate and more authoritarian capitalism or enact policies bent toward greater equality, solidarity and social and economic justice (things real socialists have never ceased advocating). The latter is what we should be insisting upon.
Not to worry, cautioned the editor of the conservative German newspaper Die Weit. 'These are all trials and crises, but they will not spell the end of America's distinctiveness.'
'The country will never convert to socialism, nor will it become a mega-state. Faced with similar circumstances, that might be the response of the pessimistic Europeans. America's culture of optimism - which all too often gets on the Europeans' nerves because they consider it to be naïve and superficial - also has the power to identify a setback as exactly that and not the end of the world,' the paper editorialized. That was a few days before the U.S. Treasury took responsibility for the well-being of distressed financial institutions all over the world.
No, the U.S. is not about to become socialist any time too soon. That alternative has not been placed before the public in a way that could be considered preferable to what we've got. Besides, a system ceases to be when it is replaced by something else. But with each passing day, as the crisis has deepened, it has become more and more obvious that 'unfettered' capitalism and 'market fundamentalism' and the neo-liberal policies they produce are discredited. Indeed, most of the world had rejected them before the current crisis began.
'The globalization agenda has been closely linked with the market fundamentalists - the ideology of free markets and financial liberalization,' economist Joseph Stiglitz told Nathan Gardels on the Huffington Post recently. 'In this crisis, we see the most market- oriented institutions in the most market-oriented economy failing and running to the government for help.' Everyone in the world will say now that this is the end of market fundamentalism.
'In this sense, the fall of Wall Street is for market fundamentalism what the fall of the Berlin Wall was for communism - it tells the world that this way of economic organization turns out not to be sustainable,' said Stiglitz. 'In the end, everyone says, that model doesn't work. This moment is a marker that the claims of financial market liberalization were bogus.'
Conservative commentator and political operative, Newt Gingrich, has come up with the terms 'crony capitalism' and 'bureaucratic capitalism,' both of which he says will be the outcome of the Bush Administration's bailout scheme. The former will mean 'a welfare state for rich investors,' he says, the latter 'salary caps and other government regulatory requirements which would drive the `private' out of `private enterprise'.'
There's a lot of talk out there about the bailout being 'socialism for the rich.' That's all so much seemingly clever rhetoric designed to make a political point, but of no substance. Nothing the Bush Administration is pushing (with the help of a Democratic Congress) bears any resemblance to anything that could remotely be called socialism. In fact, it looks far more like Italy under Mussolini than the USSR under Brezhnev. As truthdig.com columnist Robert Sheer noted last week, 'what is proposed is not the nationalization of private corporations but rather a corporate takeover of government. The marriage of highly concentrated corporate power with an authoritarian state that services the politico-economic elite at the expense of the people is more accurately referred to as `financial fascism'.'
The new Treasury Department fund 'will share many characteristics of the expanding government-sponsored pools known as sovereign funds,' wrote Landon Thomas, Jr. in the New York Times September 23.
'The new fund, assuming it is approved by Congress, could pull the United States deeper into a form of capitalism in which the most powerful financial entities are not risk-happy investment banks, but more cautious state-sponsored entities,' wrote Thomas. 'While not necessarily a third economic way, this general approach presumes that the government - in addition to the private sector - plays a crucial role in deciding how best to deploy a nation's investment capital.'
'This gets to the point of state capitalism and defining what the role of the government is in a free- market economy,' Douglas Rediker, a former investment banker at the New America Foundation in Washington, told Thomas.
'The result of the bailout would be that the government would virtually control many of the largest financial institutions in the country,' wrote Dan La Botz in Monthly Review online. 'The U.S. government and the banks of the country would suddenly be fused - or perhaps entangled would be a better word - into one extremely powerful political-economic entity. While the proposal does not envision state control of the economy as a long-term proposition, merely long enough to save the bankers, still the impact of the current proposals now being debated in Congress will be far-reaching. The American government and the people have suddenly found themselves at a turning point which was not foreseen and for which no one was prepared.'
'If you wanted to devise a name for this approach, you might pick the phrase economist Arnold Kling has used: Progressive Corporatism.,' wrote Times columnist David Brooks the same day. 'We're not entering a phase in which government stands back and lets the chips fall. We're not entering an era when the government pounds the powerful on behalf of the people. We're entering an era of the educated establishment, in which government acts to create a stable - and often oligarchic - framework for capitalist endeavor.'
'After a liberal era and then a conservative era, we're getting a glimpse of what comes next,' wrote Brooks
I can hardy wait.
An inevitable consequence of globalization is that many of the critical problems facing the planet today can only be solved through international cooperation and coordination. These include: climate change and other threats to the biosphere, aids and other infectious diseases, human migration and international finance.
The current economic crisis is an international one yet the recourse chosen by Washington to deal with it globally is to 'press' other countries to adopt measures similar to those adopted in the U.S. Under such circumstances the chance of a collective effort to restructure world capitalism would seem remote, if possible. But the demand for such is out there and how our country responds will go a long way in determining the contours of international affairs for decades to come. One has only to grasp the nature of the remarks at the recent opening of the United National General Assembly to appreciate the seriousness of the challenge.
Last week in New York, one after another, heads-of- state rose to the Assembly rostrum to drive home the message: the 'credit crunch' in the U.S. is much more than a crisis in U.S. banking; it reflects a problem threatening economic devastation across the globe. It requires an international cooperative effort in which diktat, posing as 'leadership', cannot be tolerated. Don't even think about handing the problem to the World Bank or the International Monetary Fund. The UN itself should be the arena for countries to discuss a solution for the global financial crisis, said Brazil's President, Luiz Inacio Lula da Silva: 'The global nature of this crisis means that the solutions we adopt must also be global, and decided upon within legitimate, trusted multilateral forum, with no impositions.'
Arguably some of the strongest remarks to the UN came from the leaders of Latin American countries but the most fundamental challenges came from traditional U.S. allies such as France and Germany. These are capitalist countries and for the foreseeable future will remain so. But they have a strikingly different view of how the international economy should function.
German chancellor, Angela Merkel, even revealed that an attempt had been made to enlist Washington in a collective effort to head off the crisis. At last year's meeting of the major industrial powers, she said, she had - in the world of the New York Times - 'strongly urged both the United States and Britain to be more rigorous in supervising financial activities, and even offered specific proposals to be applied to banks and other institutions.' But the U.S. was unresponsive, she said, while seeming 'to express a certain exasperation that the United States was now asking Europe for help, after inflicting damage on the rest of the world that could have been avoided.'
'At the moment, I don't think Japan needs to launch a program similar to that of the United States,' Japanese Vice Finance Minister Kazuyuki Sugimoto told reporters in Tokyo, while the European Union let it be known that its members would not be putting up money to rescue banks. 'This crisis originated in the
US and is mainly hitting the US,' German Finance Minister Steinbeck said last week. In Europe and Germany, such a package would be 'neither sensible nor necessary.'
The U.S. 'has not only turned away from decades of rhetoric about the virtues of the free market and the dangers of government intervention, but it has also probably undercut future American efforts to promote such policies abroad,' wrote the New York Times' Nelson Schwartz from Paris September 18. And most of the other governments are none to happy about it. Japanese commentators were quick to note that the Treasury bailout is precisely what Washington told them not to try when that country faced an economic crisis only a few years ago. (A condition of help for South Korea when it faced an economic crisis in the 90s was that Seoul not bail out banks and other failing enterprises.)
Last Friday, editors of the center-right German newspaper Allegemeine Zeitung compared the U.S. financial crisis to 911 saying 'this time, the attack on all-American doctrines is not the work of some foreign enemy. It comes from within, from the depths of the system. Largely unobstructed by its own state controls, American capitalism has created its own suicide bomber whose explosives - derivatives - have had an even greater effect than the flying bombs of the jihadists. The whole world - and not just New York - has a new ground zero now - Wall Street.'
French political leaders immediately seized on the latest bailout moves to trumpet their own version of 'economic patriotism.' 'We're not going to accept to pay for the broken dishes of a failed regulation' and a 'corruption of capitalism,' said French Prime Minister Francois Fillon. Nicolas Sarkozy has called for a world to 'learn the lessons of the worst financial crisis since the 1930s.' He proposed to 'moralize' capitalism, freeing it from speculators whom he labeled 'the new terrorists.' Last week, as President Bush went on television to admit the crisis is grave, Sarkozy stoutly defended capitalism but observed that 'A certain idea of globalization is drawing to a close with the end of a financial capitalism that had imposed its logic on the whole economy and contributed to perverting it.'
'The crisis is not a crisis of capitalism,' said Sarkozy. 'It is the crisis of a system that is far from the values of capitalism and betrayed capitalism.'
In 2006, long before there was any acknowledgement of the chaos to come (I put it that way because working people in the U.S. were already facing home foreclosures),when the world's elite gathered at Davos, Switzerland, chancellor Merkel had observed that 'What we have is a completely new balance of power in the world today.'
That too was evident in the General Assembly debate. In prior years no one would have expected Latin American governments to openly challenge Washington and Wall Street's conduct in the international economy. However, over a brief recent period, left-leaning political forces have taken power electorally in a number of countries, having in common a rejection of the exploitative policies of the World Bank and IMF, and the influence of the same 'market fundamentalists' that the Asians are repulsing and who have led the U.S., itself, into the present economic cul-de-sac.
No one was surprised that Cuban first vice-president Jose Ramon Machado Ventura would tell the UN that the drive for profits was increasing poverty and that the current crisis threatened the 'existence of mankind.' 'Fabulous fortunes cannot be wasted while millions are starving and dying of curable diseases,' he said. 'For a large part of the non-aligned nations, the situation is becoming unsustainable. Our nations have paid and will continue to pay the cost and consequences of the irrationality, wastefulness and speculation of a few countries in the...north.'
'The prevailing world order, unjust and uncontained, must be replaced,' Machado Ventura said.
'We don't want to conceive of the idea that the rescue of the dignity of the world's poor does not have the same priority or the same urgency of saving the institutions that operate the most powerful financial centre in the world,' said Dominican Republic president Leonel Fernandez. 'We need an international financial plan that is as urgent and as bold as the one to save Freddie Mac, Fannie Mae, Bear Stearns, Merrill Lynch and American International Group.' Fernandez added that while $700 billion is being set aside to rescue U.S. financial institutions, for something like $50 billion millions around the world could be spared a miserable existence.
'We're not going to accept to pay for the broken dishes of a failed regulation' and a 'corruption of capitalism,' said French Prime Minister Francois Fillon. Sarkozy called for a world to 'learn the lessons of the worst financial crisis since the 1930s.' 'Let's create a regulated capitalism,' he said.
On September 24 in Berlin, German Finance Steinbruck repeated Merkel's charge that Washington had, last year, resisted specific calls for regulations in the financial marketplace. 'Crisis management alone will not rebuild the lost confidence,' he said. 'We must civilize financial markets, and not just through moral appeals against excess and speculation. Self-regulation is no longer sufficient.' The US belief in 'laisser- faire capitalism; the notion that markets should be as free as possible from regulation; these arguments were wrong and dangerous,' he said. 'This largely under- regulated system is collapsing today.'
Steinbeck went on to propose new regulations and said that amid the current economic crisis the US is poised to lose its role as a global financial 'superpower.' The new world will become 'multipolar' with the emergence of stronger, better capitalized centers in Asia and Europe, he said.
Meanwhile, Oskar Lafontaine, leader of Germany's fast growing and increasingly influential Left Party, said the world is confronted with more than a banking or economic crisis and - in the words of Der Spiegel - 'but rather one of the entire intellectual and moral direction of Western society.' 'We no longer have a social market economy because of the regimes of the international financial markets,' Lafontaine said the consequence of which is increased privatization of the social services and a threat to the retirement security of millions of people. Lafontaine said the Left party wants the re-creation of a Bretton Woods-style system of foreign exchange controls with fixed trading bands, controls on international capital flows and on financial products.
'We believe that financial products should be forced to get official stamps of approval just like pharmaceutical products,' Lafontaine, the former head of the country's Social Democratic Party, said. 'Because the bitter truth is that many extremely greedy bankers don't even understand themselves what they've done. These are people who started something without knowing what they were doing and it's ended in disaster.'
'When enough banks have been nationalized or gone bust, when the last reputations have been properly shredded, and when prices of Fifth Avenue apartments and Mayfair town houses have fallen finally to earth, politicians are going to have to think hard about the lessons of the financial crash of 2008,' wrote Stephens of the Financial Times. 'Even now, someone somewhere is penning The End of Capitalism. Experience tells us snappy book titles should be treated with caution. The global financial system will never be the same again. But just as history survived the collapse of communism, so the market economy will weather the demise of Bear Stearns, Lehman, Merrill Lynch and HBOS.'
'The credit crunch and the financial firestorm have also provided a neat metaphor for the big shift in economic power in the world,' writes Stephens. He goes on to endorse the call for 'more global governance: credible international rules.'
'Capitalism will survive these financial shocks,' said Stephens. Probably it will; in any case it's good to have faith.
On Monday, the House of Representatives voted down the final draft of the bailout plan hurriedly crafted by the Administration and Congressional leaders from the two major parties. This set the stage for what was certain to be desperate attempts to put together a compromise that could win legislative approval. This takes place against a backdrop of widespread public opposition to the original plan and ever greater turmoil in the foreign money markets and on Wall Street.
Meanwhile, the dangers and challenges over the next few weeks and months are enormous. On the world scene, the U.S. could join in an international - and more democratic - effort at reconstructing capitalism in an effort to save it, or the White House - whoever lives there - and the Congress could lead us along a path of international isolation in which the rest of the world goes about its business, leaving us in economic mire. On the home front, the policymakers could enshrine a new form of corporate and more authoritarian capitalism or enact policies bent toward greater equality, solidarity and social and economic justice (things real socialists have never ceased advocating). The latter is what we should be insisting upon.
Learning from the 1929 recession
Learning from the 1929 recession
October 7th, 2008 · 2 Comments
Barry K Gills
The British economist Alfred Marshall said (apparently to his followers) “Use the mathematics- then burn it!” Advice that has since too often tended to be forgotten by those who pretend to have a ’scientific’ mathematical economics that encompasses economic reality.
Another line of discussion reopened today in the Financial Times- as Tony Jackson commented on his recent reading of Kindleberger’s ‘The World in Depression: 1929-1939′ - where he follows Kindleberger’s ‘explanation’ that ‘the market collapse that began in 1929 was in response to a recession which had already started’. Whereas this time ‘the recession is following the collapse’.
While this begs a ‘chicken and egg’ debate- (and also rehearses Kindleberger’s thesis that the capitalist system requires a single stabiliser- ie a global hegemon- like the US- to set things right) it also goes directly contrary to the explanation given by John Kenneth Galbraith in ‘The Great Crash- 1929.’
He argued that the stock market crash was mainly the result of a previous long and excessive ’speculative orgy’ in the stock markets- which had become a general cultural mentality in America to perhaps an unprecedented degree- ( a super-bubble) and not due to a recession already in train- and that the stock market crash and the inaction by governemnts, treasuries and central banks to take effective remedial actions led to the crash becoming a prolonged and deep depression.
Galbraith also concludes in his chapter on ‘Cause and Consequence’ that the American economy in 1929 was however ‘fundamentally unsound’ and lists ‘five weaknesses’ that had an ‘especially intimate bearing on the ensuing disaster’.
These five weaknesses were:
1. The bad distribution of income (ie extreme polarisation of wealth in US, with a few ever richer rich and a mass of working poor)
2. The bad corporate structure (replete with swindlers frauds, promoters, and a ‘flood tide of corporate larceny’; holding companies and investment trusts
3. The bad banking structure (inherently weak, large number of small units (unlike today- small no of large units). Galbraith notes how falling income and employment fed falling values and this fed bank failures- in a domino effect where the weak brought down both the other weak as well as the strong banks
4. The dubious state of the foreign balance- in this case a US trade surplus and US banking loans to deficit trade partners to cover their payments to the US, and subsequent default on these loans
5. The poor state of economic intelligence- where the economists and ideas in late 20s and early 30s ‘were almost uniquely perverse’ and in the aftermath of the crash ‘the burden of reputable economic advice was invariably on the side of measures that would make things worse (partly out of a historical and misguided fear of inflation)
It seems to me quite apparent that comparisons between the great depression and the present crisis are instructive at miniumum and that there are parallels in several of the key patterns- where we ought to also look to analyse the ’solutions’ - since mere financial reregulation will surely NOT be the complete answer to such ‘fundamentally unsound’ economic foundations. Our research needs to focus on these matters with urgency and seriousness of purpose- as ‘lessons’ from the 30s are useful indeed.
October 7th, 2008 · 2 Comments
Barry K Gills
The British economist Alfred Marshall said (apparently to his followers) “Use the mathematics- then burn it!” Advice that has since too often tended to be forgotten by those who pretend to have a ’scientific’ mathematical economics that encompasses economic reality.
Another line of discussion reopened today in the Financial Times- as Tony Jackson commented on his recent reading of Kindleberger’s ‘The World in Depression: 1929-1939′ - where he follows Kindleberger’s ‘explanation’ that ‘the market collapse that began in 1929 was in response to a recession which had already started’. Whereas this time ‘the recession is following the collapse’.
While this begs a ‘chicken and egg’ debate- (and also rehearses Kindleberger’s thesis that the capitalist system requires a single stabiliser- ie a global hegemon- like the US- to set things right) it also goes directly contrary to the explanation given by John Kenneth Galbraith in ‘The Great Crash- 1929.’
He argued that the stock market crash was mainly the result of a previous long and excessive ’speculative orgy’ in the stock markets- which had become a general cultural mentality in America to perhaps an unprecedented degree- ( a super-bubble) and not due to a recession already in train- and that the stock market crash and the inaction by governemnts, treasuries and central banks to take effective remedial actions led to the crash becoming a prolonged and deep depression.
Galbraith also concludes in his chapter on ‘Cause and Consequence’ that the American economy in 1929 was however ‘fundamentally unsound’ and lists ‘five weaknesses’ that had an ‘especially intimate bearing on the ensuing disaster’.
These five weaknesses were:
1. The bad distribution of income (ie extreme polarisation of wealth in US, with a few ever richer rich and a mass of working poor)
2. The bad corporate structure (replete with swindlers frauds, promoters, and a ‘flood tide of corporate larceny’; holding companies and investment trusts
3. The bad banking structure (inherently weak, large number of small units (unlike today- small no of large units). Galbraith notes how falling income and employment fed falling values and this fed bank failures- in a domino effect where the weak brought down both the other weak as well as the strong banks
4. The dubious state of the foreign balance- in this case a US trade surplus and US banking loans to deficit trade partners to cover their payments to the US, and subsequent default on these loans
5. The poor state of economic intelligence- where the economists and ideas in late 20s and early 30s ‘were almost uniquely perverse’ and in the aftermath of the crash ‘the burden of reputable economic advice was invariably on the side of measures that would make things worse (partly out of a historical and misguided fear of inflation)
It seems to me quite apparent that comparisons between the great depression and the present crisis are instructive at miniumum and that there are parallels in several of the key patterns- where we ought to also look to analyse the ’solutions’ - since mere financial reregulation will surely NOT be the complete answer to such ‘fundamentally unsound’ economic foundations. Our research needs to focus on these matters with urgency and seriousness of purpose- as ‘lessons’ from the 30s are useful indeed.
Transforming the Global Economy: Solutions for a Sustainable World
Transforming the Global Economy: Solutions for a Sustainable World
Susan George
6 October 2008
The current financial crisis provides the ideal opportunity to implement tax reforms that would finance the conversion to eco-friendly industry: an environmental Keynesianism that would pull the world out of economic ruin and social chaos while getting the runaway global financial system under control, argues Susan George.
Please first let me congratulate the organisers of Schumacher North for their initiative in bringing this lecture series and other activities of the Schumacher Society to Leeds. It’s an honour to be here and especially to share the platform with two brilliant people whom I greatly admire. I also want to thank the organisers for the privilege of honouring the memory of Dr Schumacher, a man far ahead of his time who bequeathed to us a lasting legacy. It’s a challenge to be worthy of that heritage in a lecture bearing his name.
But I intend to try. My talk today will concern the stage I’ve arrived at in a kind of reflexion in progress—I don’t mean a book, although it may well become that as well—but an effort to make sense of the fast moving events in our battered world and an attempt to think about them in a more unified way.
Philosophically speaking, the thing-in-itself, the isolated object whether it’s an electron, a human cell, an organism, a single word —even a human being--makes sense only in the context of its relationships, its place in its physical, linguistic or social environment . Margaret Thatcher once famously said, “There is no such thing as society”. She thus perfectly embodied the foundations of the neo-liberal ideological programme which should, ideally, prevent us from even thinking about ourselves and others in our natural and social context. We must be taught to believe that we are not citizens or members of a social body but discrete, individual consumers. We are entirely responsible for our own destinies and if we fall by the wayside for whatever reason—illness, job loss, accident, failure, whatever—it’s our own fault. We should have foreseen the case and planned for it. We have no responsibility for other people either. Solidarity is a banished word. Nor are we accountable for the state of the planet—homo sapiens is the only important species and humans are isolated if not immune from natural, physical laws. That’s the essence of the neo-liberal spirit: “You’re on your own” as Barack Obama has been saying to Americans to encapsulate the philosophy of his opponents.
If you are well-schooled in neo-liberalism, you will never join a social movement, never engage in a struggle against an unjust action of the government, never contribute to an effort to protect the natural world because not only will you make a fool of yourself, not only will your effort fail, but even if successful it will lead eventually to oppression, even totalitarianism, as Thatcher’s mentor Professor Friedrich von Hayek argued. And, as he also taught, economic freedom is superior to every other kind of freedom, whether political, religious or intellectual.
I believe to the contrary that our only hope lies in understanding everything we confront today as a link in an ever-more-complex chain, as an element in a system. The danger with this approach of course is to become lost and frustrated in the syndrome of “Everything is connected to everything”. That’s true, everything is connected to everything, but we still have an enormous task ahead in trying to identify the priority connections, to understand how they work together and what we can do to change them, because they definitely do need changing. I will argue that the present connections are dysfunctional, they have become perverse: they form a system that worsens the human condition and irrevocably damages the planet. But there is hope, because what has been constructed by humans can also be dismantled by them.
All this may sound rather vague so let’s get down to specifics. To make matters more concrete, I’d like to talk now about the most obvious crises we face collectively today, why they are all linked and why the solutions to them must be linked as well.
The first of these crises is social—the crisis of mass poverty and growing inequality within individual countries and between the rich and poor countries. The second is the financial crisis that Wall Street, the City and the public authorities refused to see coming because they were living in bubble-land. It began with the subprime affair in the United States but has spread inexorably like a lava flow in the US and elsewhere, threatening to plunge the global economy into a prolonged period of stagnation as severe as the Great Depression. Every day while I was writing this lecture at home, a new financial institution went down the drain or on the block and the end is not yet in sight. The third crisis, most ominous of all, is that of climate change and species destruction. It is accelerating faster than most scientists, much less governments, thought possible, causing many to ask if we have not already entered the era of the runaway greenhouse effect.
Each of these crises—social, financial, environmental--is negatively linked to the others, they intensify each other with negative feedback; they lead to worst-case scenarios. Let us take just a few examples of these perverse interactions.
The poverty-inequality crisis is a good place to start. This crisis is well documented; no one seriously denies the numbers. The World Bank recently recognised that it had grossly underestimated—by about 400 million—the numbers of the very poor, and even then its figures stop at the year 2005 and don’t include recent upheavals in food and energy costs that have swelled the ranks of the impoverished. Even more important, however, is the fact that for the first time in human history, there is no excuse for mass poverty and deprivation. Taking this assertion seriously already helps to point us towards a solution.
Most scholars and institutions concerned with such issues focus on poverty per se but I think it’s more useful and enlightening to focus on wealth. It may not be obvious to everyone that the world is actually awash in money. Most of it is still in North America and Europe but the numbers of the seriously rich on other continents are catching up fast. Those who have the money know very well how to keep it and, with their hired help, the battalions of lawyers, accountants and lobbyists, they are busy salting away their profits in tax havens, finding loopholes and protected investments, lobbying fiercely in parliaments and ministries against regulations on banks and financial markets. As you can see, I began by talking about poverty but I am already touching on the links with the financial crisis.
How many of you knew that ten million people, according to the latest Merrill-Lynch World Wealth Report, together boast investable, liquid funds of more than $40 trillion? That’s 40.000 billion or 40 followed by 12 zeroes. This wealth is above and beyond the value of their houses, cars, yachts, wine or art collections and so on and it is equivalent to about three times the GDP of either the United States or Europe. You might like another simple calculation. Assume that you have one billion dollars, which is the cut-off point for the latest Forbes magazine list of 1125 truly rich individuals in the world. If despite your billion you are such a dim-witted investor that you get only a five percent return on your fortune, you will still have to spend $137.000 every day of the year in sheer consumption or you will automatically become richer. My point is that cash is abundant and there’s no shortage of available wealth.
We also know a great deal about inequality. The UN World Institute for Development Economic Research, WIDER, estimates total world household assets at about $125 trillion. This is about three times world GDP and unsurprisingly, the top two percent of the world captures more than half of that wealth. The top 10 percent, which certainly includes many of us here, hold 85 percent, while the bottom half of humanity is obliged to stumble along with barely 1 percent. All you need to be classed in the top half of humanity is a meagre $2200 in total assets—that includes your house, your land or items like your car or your refrigerator--hardly a princely sum. If all household assets were divided equally—impossible and probably not even desirable to achieve—everyone on earth could have a share of $26.000. So again, money as such isn’t the problem.
In all the countries where 90 percent of the world’s population lives, inequalities have increased especially since the 1980s. At this point in the argument, the neo-liberals usually jump in to remind us that rising tides lifting all boats. They admit that inequalities have grown, but still argue that the poor are better off than they were. It seems almost rude to remind them in turn that falling tides have the opposite effect, they swamp and strand the more fragile boats and that is where the tide of the financial crisis is now taking us.
The real point, however, is not the absolute numbers but the fact that inequality makes the economy and also the natural environment worse for everyone, rich or poor. Two experienced academics, Tony Addison and Giovanni Andrea Cornia, put it this way: “Inequality has risen in many countries over the last two decades [and] little progress can be made in poverty reduction when inequality is high and rising....Contrary to earlier theories of development, high inequality tends to reduce economic growth and therefore poverty reduction through growth.”
Although it’s true that economic growth has reduced poverty, particularly in China, one must also ask “At what cost?” China has now overtaken the United States in greenhouse gas emissions and frighteningly has hardly even begun its transition to the automobile society. China also requires at least 10 times as much energy as the more mature industrial societies to produce a unit of GDP.
Growth certainly isn’t the answer ecologically, but even economically it fails the test because the benefits accrue almost entirely to the top of society. That is Cornia and Addison’s main point.
We have also learned in the past few months that it is entirely possible to push tens of millions of poor people off the ledge where they had just gained a foothold and send them back into the depths of poverty. Food riots, most of them urban, in at least thirty different countries have revealed another scary new phenomenon: the worldwide food crisis. Until now, food shortages and famines tended to be local, but so many societies have accepted neo-liberal trade mantras and become dependent on world markets for their basic daily staples that today a sudden spurt in prices is felt from Haiti to Egypt to Bangladesh.
The neo-liberal institutions like the World Bank, the WTO and the European Commission continue to pretend that poverty reduction will result from more growth and more trade. They fail to mention that both growth and trade will reinforce the environmental crisis. The food and energy crises have in turn strong links to the financial crisis, since speculation has been an important factor in both. Food and energy are also intimately linked to the climate crisis as one can see instantly when one thinks of carbon-loaded fossil fuels or of agro-fuels taking vast amounts of land away from food production.
At this point in the discussion, especially when one is speaking to concerned, engaged, decent people like those likely to be found at a Schumacher lecture, someone will raise two highly pertinent questions. The first is this: “ Isn’t there a point where people with huge fortunes say ‘enough is enough’ and start sharing?” Some do—Bill Gates and Warren Buffet are oft- cited examples. But as a class, I’m sorry to say that the answer is no. We know a lot about poverty lines but there is no such thing as a wealth line and the word “ enough “ is not part of the vocabulary of this class. You needn’t believe me. Listen to the expert who said “All for ourselves and nothing for other people seems in every age of the world to have been the vile maxim of the masters of mankind.” That was not Karl Marx but Adam Smith, in his classic 1776 treatise on capitalism, the Wealth of Nations. Little has changed since then.
The second question is “But why don’t the neo-liberal institutions, like the World Bank, the International Monetary Fund, the World Trade Organisation, the European Commission and the US government recognise that their policies have failed? Why do they keep on pushing them wherever and whenever they can?” The answer is not just that institutions are always loath to admit their mistakes, especially when these have killed and ruined so many millions. It is also that these policies have not failed.
To the contrary, they have produced exactly the results they were intended to produce. They have made a tiny fraction of international society rich beyond imagining, they have kept many dependent countries dependent in a new, less visible sort of colonial relationship and they have made so-called free trade, privatisation and unfettered capitalism the rule in countries that previously wanted little or nothing to do with them. Furthermore, they have imposed their policies with relatively little organised protest because their ideology has been expertly produced, packaged and delivered. Ideology can alas have a far stronger influence than facts. This is why we must fight on the practical front, of course, but also -- I happen to believe primarily -- fight the battle of ideas.
In any event, the massive funds belonging to rich people who already have most of the material goods they need or want are generally devoted to more or less speculative investments. Hedge funds, for example, are estimated to be sitting on about three trillion dollars, even today when so many investments have suffered melt-down. The financial institutions have been frantically innovating, particularly over the last decade. The entire incentive structure of the banking and finance industry has become perverse: the large institutions know perfectly well that they are “too big to fail”, consequently they also know that no matter how risky their actions, they will be bailed out by the public purse and has become all too plain. Beforehand, top management takes the money and runs.
Between the years 2000 and 2006, average annual profits of the financial sector in Great Britain averaged 20 percent—that is, two or three times the profit rate of other sectors of the economy. Huge bonuses, especially in the US and the UK, went to a handful of people, intensifying inequalities, whereas millions further down the ladder have lost their jobs and often their homes. Such profits were themselves clearly not sustainable because at some point, financial gain must be based not just on speculation but on the real economy.
Now that the bailouts are coming thick and fast, we have before us a singular example of socialism for the rich, the well-connected and Wall Street, in which the profits are grabbed by the usual suspects and the losses, tremendous losses, are billed to taxpayers. The United States has in effect nationalised these institutions and their debts--without getting anything from the financial industry in exchange.
As the sub-prime crisis has continued to ooze like a giant oil spill over the whole economy, speculators have searched for alternative profitable areas and created the food-price bubble trouble in which we now find ourselves. What happens then? The resource-poor, the world’s hungry, grab whatever they can, they chop down trees, kill animals and overexploit what little land they may have. Poverty is bad news for nature. But so is wealth. Even though there are far fewer of them, the rich cause much greater environmental damage with their dinosaurian ecological footprints. People who use the population argument to explain the multiple crises and who see in population control the solution are missing a crucial point—it’s not so much the number of people, although numbers are important, as their relative weight.
Furthermore, as we have repeatedly witnessed, the frequency and the fury of storms provoked by global warming hit the poor and the poorer regions of the globe hardest. There is worse to come. We have not even begun to comprehend the perils of climate change, including vastly increased numbers of environmental refugees who will crowd the planet due to droughts, flooding and crop failures. The Pentagon is already working on how to stem this tide by countering by whatever means necessary the refugees frantic efforts to reach more favourable lands. Government planning for this perfectly predictable phenomenon is limited to increased surveillance and security responses, not attempts to make outmigration less necessary. And yet the UN Intergovernmental Panel on Climate Change [IPCC] which is probably the most respected scientific body in the world, has already warned us that in Africa, the yields of rain-fed agriculture are likely to be reduced by 50 percent, deserts will gain ground, species destruction has already reached such proportions that we are in the midst of the sixth geological extinction of the planet’s four and a half billion-year history. The fifth extinction was the one that put paid to the dinosaurs.
I could go on drawing out relationships between the poverty, financial and ecological crises but I’m sure you need no more. The question is what we can do about all this and by “we” , I mean people everywhere who understand that the triple crisis is real and urgent.
Knowing that I will doubtless offend a great many people here, let me say straight away that there is an exit strategy, a genuine solution exists, but it is not in my view the one that many well-meaning environmentalists have long advocated. I’m sorry, but the time has passed for telling people to change their behaviour and their lightbulbs; that if enough people do this, then together “we” can save the planet. I’m sorry, but “we” can’t. Obviously I’m not suggesting that people shouldn’t change their behaviour and their lightbulbs—but even if the entire population of Europe does so—a most unlikely scenario—it’s not going to be enough. I agree as well with proposals for localisation and scaling down, but we have also got to scale up.
We need large-scale solutions, sophisticated, industrial solutions and huge involvement of governments in order to cut greenhouse gas emissions drastically enough to save our future. In other words, we must have the courage to challenge not just our political leadership but the entire neo-liberal, unregulated, privatised, capitalist economic system in place in order to provoke and promote a quantitative and qualitative leap in the scale of environmental action. Dare I say it here? Sometimes big can be beautiful and right now is one of those times.
Since I believe that individual and local solutions are necessary but tragically insufficient to address the seriousness and the urgency of the ecological crisis, I will use the rest of my time to discuss the twin problems of how to deal with governments and with the capitalist corporate production and financial system. The dilemma I wrestle with is this: Can we save the planet while international capitalism remains the dominant system, with its focus on profit, share-holder value, predatory resource capture and with no-holds-barred finance capital making more and more decisions? Can we rescue our natural home when confronted with a powerful caste that does not know the meaning of “enough” and is allergic to the kind of fundamental change a New Ecological Economic Order requires? Can we move forward when governments basically work for the interests of that class?
On bad days I reply No: We can’t save the planet. It’s impossible to reverse the climate crisis under capitalism. But that is a despairing answer and if true, it means there is virtually no hope. No hope, because I do not see how even the most convinced, most determined people could replace, much less overthrow capitalism fast enough to carry out the necessary systemic change before a runaway climate effect takes hold—always assuming it hasn’t done so already. First of all, there are not that many convinced and determined people prepared to act against the dominant economic system and there is nothing that resembles in the smallest degree an avant-garde revolutionary party that might lead them even if they existed. There is no one-size-fits-all replacement solution for capitalism. Considering the historical record and role of such parties and such solutions, I consider this an unmistakably good thing.
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But there are other obstacles to once-for-all revolutionary change. Nobody knows, figuratively speaking, who the Tsar is that we would have to overthrow today and nobody has a clue where to find the Winter Palace we would have to storm. We know the Winter Palace isn’t on Wall Street which was up and running again a few days after 11 September and is now taking full advantage of the bailouts. The US is only one of many world capitalist centres. Even if we were to win in one place, the nomadic money-moguls would simply mount their camels and head for another. The worlds of 1917 and of 2007 are utterly different, so we must try to move beyond this revolutionary impasse, this dead-end and find a new synthesis.
The question we face is not so much what to do — I think that is reasonably clear and I’m about to spell it out--but whether we will have the intelligence and the strength to seize the great opportunity with which we are now presented. Perhaps the words “great opportunity” strike you as wildly optimistic considering the long and dire preamble you’ve just listened to. However, I am now going to argue that not only are individual solutions insufficient but that the remedies offered by Kyoto, Bali, Bonn or whatever timid future agreements may be negotiated are tragically inadequate, Once more--I cannot stress this enough--the scale is crucial. And the great opportunity is to be found in the financial crisis itself. Properly targeted and used, it could open the door to the quantitative and qualitative leap we must make.
Some progressive people will reject the solution I propose, but I would then ask them what alternative they offer. The ecological crisis is of a different nature from the financial and poverty crises in the sense that once climate change is underway, as it is now, it is irreversible and we haven’t time for theoretically perfect solutions. With politics you can sometimes turn back and start over, but not where nature is concerned. So you can accuse me if you like of suggesting a way to give capitalism a new lease on life and I will plead guilty.
Let’s take first the slightly easier question “How can we deal with governments?” at least in the more or less democratic countries. China is another matter. People are generally way ahead of their governments in recognising the emergency. The political issue is not simply to "throw the rascals out" because they would be replaced by other rascals just as bad, just as beholden to the corporations, their lobbies and the financial markets. The trick is to convince politicians that ecological transformation and environmental practices can pay off politically.
This means that citizens, activists and experts, whether they like it or not, have got to work with local, regional and national politicians and governments; help them to find like-minded partners and formulate ambitious projects they can undertake on the broadest possible scale. Citizens, activists and experts must furthermore help these politicians and governments to become shining ecological examples with the electorate by publicising their efforts and their successes. Could the Schumacher Society become a kind of nexus for an ongoing forum of best-standards/best practice, bringing together political decision makers at every level with citizens groups and experts to discuss and carry out the best public-sector initiatives? Politicians must be convinced that these policies will not just work but also be highly popular with their constituencies.
Now let’s take the more difficult question of confronting the economic system as a whole. In his book Collapse, Jared Diamond examines several historical cases of social extinction due to over-exploitation of the environment. He identifies several common characteristics. One of these is the isolation of the elites, giving them the capacity to keep on consuming way above ecologically sustainable limits long after the crisis has already struck the poorer, more vulnerable members of society. That is where we are now globally, not just in isolated places like Easter Island or Greenland.
So how can we realistically combat the ecological footprints of our dinosaur elites, recognising that we don’t have the option of shouting “Off with their heads” in some imagined, world-wide revolution. Nor can we force them to change both themselves and the system that serves them so well, whereas we know that we must change that system because it is raping the planet and its inherent logic is to keep on doing so.
I can see only one way out: the coming together of people, business and government in a new incarnation of the Keynesian war economy strategy. I was born in the United States in 1934 and I remember well when the US switched massively to a war economy, converting all the rubber plants in my native city [Akron, Ohio] to production not for private cars and trucks but for the military. There was huge citizen involvement and support. Thousands of factories, research labs, housing projects, military bases, day care centres, and schools were built or expanded during the war. Public transport was improved and worked overtime to move millions of men and women to Army bases or new defence jobs.
Yes, there were still worker-management conflicts and yes, big corporations rather than small business got most of the government contracts but on the whole the workers were well paid, African-Americans and women began making a few modest gains and the whole war effort finally pulled the United States out of the Depression—it was Keynesianism on a huge scale. There was also an elite group of businessmen called “Dollar-a-Year Men” on loan from their companies to the government, who were charged with making sure that military production and quality targets were met. They had enormous prestige—my godfather was one and I was doubtless insufferable bragging to my little school friends about him.
Why am I going back over this ancient history? Because I think we have a similar opportunity today. The US and the world economy are heading downhill fast and the fallout for ordinary people in terms of jobs, housing, consumption and future welfare is going to be grave. If this diagnosis is right, then some new economic tools will have to be used to combat recession and stagnation, simply because the old ones have already been pushed to their limits and have little or nothing left to give.
The way Central Banks and Treasuries usually try to solve financial recession or depression is through standard remedies like interest rate cuts, currency devaluations or incurring new debt—but the United States has reached the end of its leash on that score. Interest rates are already extremely low—although not in Europe, where the European Central Bank and its hidebound president are ideologically committed to the same sorts of monetary policies that prolonged the Great Depression in the 1930s. The dollar is already weak, which makes US exports cheaper, but it can’t be devalued much further without risk. Deficit spending is already beyond belief. With the bailout of Fannie Mae and Freddie Mac, the Federal Reserve in effect took on their bad debt and added hugely to the liabilities of the United States Treasury. It risks doing so again. Households too are over-indebted and are losing more equity every day as the value of their dwellings deteriorates.
Since the traditional tools are worn out, the only new tool I can think of to pull the world out economic ruin and social chaos is a new Keynesianism, not military this time, but environmental; a push for massive investment in energy conversion, eco-friendly industry, new materials, efficient public transport; the green construction industry and so on.
Stringent standards for new buildings must become the norm; older ones can be “retro-fitted” on easy financial terms; families and commercial property-owners can receive financial incentives for installing green roofs and solar panels and sell excess energy to the grid. Research and development can be oriented towards alternative energies and strong, ultra-light materials for airplanes and vehicles. Technically speaking, we already know how to do such things, although some clean solutions are still more costly than dirty ones. Mass-produced, they would become less so.
All these new, eco-friendly industries, products and processes would have huge export value and could quickly become the world standard. I am trying to describe a scenario that can be sold to the elites because I don’t think they will embrace genuine environmental values and conversion if there’s nothing in it for them. But this approach is not merely a cynical attempt to get the elites to move in their own interests. There are also plenty of advantages in such an economy for working people. A huge ecological conversion is a job for a high-tech, high-skills, high-productivity, high-employment society. It would be supported, I believe, by the entire population because it would mean not just a better, cleaner, healthier, more climate-friendly environment, but also full employment, better wages, and new skills, as well as a humanitarian purpose and an ethical justification—just like World War II.
How could one finance such a huge effort? It would have to involve targeted government spending in the traditional Keynesian sense and governments are bound to complain that they haven’t the means to carry out such a policy.
The financial crisis provides the ideal opportunity both to finance the conversion and to get the runaway global financial system under control.
At present, taxes almost always stop at national borders. The secret is to take taxes up to the European level and to the international one through currency and other financial transaction taxes. People who oppose such schemes pretend they are not feasible because one would need to obtain the consent of every national jurisdiction in the world, but that is not correct. In fact, currency and other transaction taxes would require nothing more than political determination, the cooperation of the Central Bank and a few lines of software. For the currency transaction tax first proposed by James Tobin in the 1970s and now considerably refined, the tax base is the currency itself, not the place it’s traded. Thus the European Central Bank could easily collect the taxes on any transactions involving euros, the Bank of England the same for the pound, the Fed for the dollar and so on. Since currency trades now amount to $3.2 trillion dollars every day, a tax of one basis point, that is, a levy of one per thousand could raise a tidy sum for ecological conversion and poverty reduction. Britain already imposes a tax on stock market transactions but other European countries do not and should imitate Britain.
Carbon taxes are another much mooted and equally feasible idea. So is a unitary profits tax on transnational corporations, which would require knowing the total sales of the company, the total taxes paid, the sales realised in each jurisdiction and the tax paid in each jurisdiction. If, for example, a TNC reported that in country X, a particularly low-tax jurisdiction, it made 5 percent of its sales yet paid 50 percent of its taxes, the authorities would find it a bit fishy. I’m presenting an extremely crude summary here but believe me, there are experts—bankers, corporate lawyers, fiscal experts and accountants--who know exactly how to do such things. Perhaps to encourage more local consumption, one could also think about taxing the miles travelled by the food we eat and the clothes we wear.
We would not forget the poor countries of the South which are the major terrain of the poverty crisis. Debt cancellation for poor countries that the G-8 has been promising for a decade must finally happen but against the requirement that these countries also contribute to the planetary environmental effort through re-forestation, soil conservation, species protection and the like. They would also be required to involve their own people in democratic decision-making and the funds would be carefully monitored by independent auditors.
Tax havens that allow affluent individuals and corporations to avoid paying their fair share of the conversion should be shut down: it would be cheaper to pay the inhabitants of the Cayman Islands, Liechtenstein and the rest a living wage for twenty years. Plenty of cash would remain for eco-investments, job-creation and poverty relief.
In exchange for their bailouts, the banks and investment houses have to accept regulation—not just regulations to insure transparency and eliminate the incentives for stupid behaviour but also more stringent ones forcing them to participate in the ecological offensive. They should be obliged to devote X percent of their loan portfolios to eco-projects at below market interest rates—which they could make up by charging much higher rates on loans to dirty or otherwise anti-ecological projects. Low or no-cost financing for home conversion projects should be another compulsory priority for banks. This could give a huge spurt to the construction industry.
Nobody is asking for the moon here. Banks would still make loans, finance investments and earn a fair return for their services. Taxes on currency transactions at one basis point are not going to ruin anyone. Unitary profits taxes on large corporations would simply return us to the era when the companies paid their taxes because they couldn’t avoid them. The point is that a Keynesian taxation and redistribution system would be invested, nationally and internationally, both ecologically and socially, in education, health care, clean, green energy, efficient water distribution, communications technology, public transport, and various other things the world needs and that we already know how to do. These measures would, in turn go a very long way to creating opportunities for far more people to participate in the new green economy through jobs, life-long education, more social protection and reduced inequality. Getting the present financial crisis-producing, free-flowing, unregulated financial system under public and citizen control is the prerequisite for solving both the environmental and the poverty crises.
In other words, it’s a Public Relations dream. Whichever political parties understand this can win on such a programme without anyone having to bring down the entire capitalist system as a prior condition for saving the planet.
A Keynesian ecological programme would furthermore bring many constituencies together in a common cause. As matters now stand, politically speaking, no single interest group can solve the problem that concerns it most. By this I mean that, by themselves, ecologists can't save the environment; farmers alone can’t save family farms; trade unions alone can’t save well-paid jobs in industry and so on. Broad alliances are the only way to go, the only strategy that pays. The Global Justice Movement, as international social activists call it, has begun to have some success in working democratically and making alliances with partners who come from different constituencies but are basically on the same wavelength.
Now we must go beyond this stage and attempt something more difficult: to forge alliances also with people we don't necessarily agree with on quite major questions—for example, with business. This can only be accomplished by recognising that disagreements, even conflicts, can be fruitful and positive so long as the areas where it is possible to agree are sought out, identified and built upon. We must find where the circles of our concerns overlap. At least one of those overlaps ought to be saving our common home. I don't see any other way of generating citizen enthusiasm, involvement and the qualitative and quantitative leap in scale that is now required.
I haven’t time to elaborate on all the technical details concerning the content and the financing of necessary environmental investments. What I can do is guarantee you that the conversion to a green economy is technically feasible. The schemes for new taxes have been thought through; the industrial prototypes already exist; the machinery is ready to hum into action the moment people can make their politicians accept the challenge. Getting the financial system under control and taxing international capital at quite ridiculously low rates in order to redistribute it institutionally and internationally would be enormously popular. We could seriously attack climate change and eliminate the worst of world poverty within a decade. We are talking politics, not technical aspects here and trying to figure out a way to tame the raging beast, the crisis-producing, free-flowing, unregulated financial system and putting it under public and citizen control.
Capitalism is not sane in the sense that most people understand sanity. We humans normally think about our future, that of our children and the future of our countries and the world. The market, on the contrary, operates in the eternal present which, by definition, cannot even entertain the notion of the future and therefore excludes safeguards against future, looming destruction unless these safeguards are imposed upon it by law.
We need law, for sure, and political forces with the backbone to propose and to vote the law into existence, but we also need to think about human motivation. Remember the prestigious Dollar-a-Year Men of the 1940s and imagine what might happen if we could transpose them into the world of 21st century capitalism. A significant number of contemporary captains of capitalism, all of them with bloated, unimaginable salaries, might be brought to believe that money is all very well, but is there nothing more? Why not found an extremely exclusive Order of the Earth Defenders, or the Environmental Knights or the Carbon Conquerors who alone, in recognition of their special contributions to the national and international environmental conversion effort. They would have the right to display a highly visible emblem on a banner in front of their homes; a fanion on their cars, a green and gold rosette in their buttonholes like the French Legion d’Honneur or a Congressional Medal of Ecological Honour. They would belong to the small assembly of the anointed; those who provide the means and have the honour of saving the earth. Becoming a member ought to appeal to their competitive spirit.
In conclusion, let me say that myth has always been the driving force of every great human achievement, from Greek democracy to the Renaissance to the Enlightenment and the American and French Revolutions. So must it be in the coming age of Ecological Stewardship. To save the planet, we must change, quickly and profoundly, the way the majority thinks and feels and acts, and we must start with the social forces we have right here and right now, and no others. It’s no use wishing they were different ones or stronger, or wiser. We must play the hand history deals us.
For such a change, we will need six “Ms”, starting with Money, Management and Media. But even more important than these three “Ms”, we must try to create a new sense of Mission and Motivation and Myth at the noblest level. “Myth” in this sense has nothing to do with story-telling or lies. It is the grand narrative that empowers us to believe that we can accomplish what we must accomplish. It speaks to the deepest motivations of human consciousness and inspires the desire for honour and for a life’s work which transcends death. The elites already have Money, Management, Media. On our side, we have Mission, Motivation and Myth. If we can bring together all these, the future will take care of itself.
And wouldn’t that be nicer than having another war?
Thank you.
Susan George
6 October 2008
The current financial crisis provides the ideal opportunity to implement tax reforms that would finance the conversion to eco-friendly industry: an environmental Keynesianism that would pull the world out of economic ruin and social chaos while getting the runaway global financial system under control, argues Susan George.
Please first let me congratulate the organisers of Schumacher North for their initiative in bringing this lecture series and other activities of the Schumacher Society to Leeds. It’s an honour to be here and especially to share the platform with two brilliant people whom I greatly admire. I also want to thank the organisers for the privilege of honouring the memory of Dr Schumacher, a man far ahead of his time who bequeathed to us a lasting legacy. It’s a challenge to be worthy of that heritage in a lecture bearing his name.
But I intend to try. My talk today will concern the stage I’ve arrived at in a kind of reflexion in progress—I don’t mean a book, although it may well become that as well—but an effort to make sense of the fast moving events in our battered world and an attempt to think about them in a more unified way.
Philosophically speaking, the thing-in-itself, the isolated object whether it’s an electron, a human cell, an organism, a single word —even a human being--makes sense only in the context of its relationships, its place in its physical, linguistic or social environment . Margaret Thatcher once famously said, “There is no such thing as society”. She thus perfectly embodied the foundations of the neo-liberal ideological programme which should, ideally, prevent us from even thinking about ourselves and others in our natural and social context. We must be taught to believe that we are not citizens or members of a social body but discrete, individual consumers. We are entirely responsible for our own destinies and if we fall by the wayside for whatever reason—illness, job loss, accident, failure, whatever—it’s our own fault. We should have foreseen the case and planned for it. We have no responsibility for other people either. Solidarity is a banished word. Nor are we accountable for the state of the planet—homo sapiens is the only important species and humans are isolated if not immune from natural, physical laws. That’s the essence of the neo-liberal spirit: “You’re on your own” as Barack Obama has been saying to Americans to encapsulate the philosophy of his opponents.
If you are well-schooled in neo-liberalism, you will never join a social movement, never engage in a struggle against an unjust action of the government, never contribute to an effort to protect the natural world because not only will you make a fool of yourself, not only will your effort fail, but even if successful it will lead eventually to oppression, even totalitarianism, as Thatcher’s mentor Professor Friedrich von Hayek argued. And, as he also taught, economic freedom is superior to every other kind of freedom, whether political, religious or intellectual.
I believe to the contrary that our only hope lies in understanding everything we confront today as a link in an ever-more-complex chain, as an element in a system. The danger with this approach of course is to become lost and frustrated in the syndrome of “Everything is connected to everything”. That’s true, everything is connected to everything, but we still have an enormous task ahead in trying to identify the priority connections, to understand how they work together and what we can do to change them, because they definitely do need changing. I will argue that the present connections are dysfunctional, they have become perverse: they form a system that worsens the human condition and irrevocably damages the planet. But there is hope, because what has been constructed by humans can also be dismantled by them.
All this may sound rather vague so let’s get down to specifics. To make matters more concrete, I’d like to talk now about the most obvious crises we face collectively today, why they are all linked and why the solutions to them must be linked as well.
The first of these crises is social—the crisis of mass poverty and growing inequality within individual countries and between the rich and poor countries. The second is the financial crisis that Wall Street, the City and the public authorities refused to see coming because they were living in bubble-land. It began with the subprime affair in the United States but has spread inexorably like a lava flow in the US and elsewhere, threatening to plunge the global economy into a prolonged period of stagnation as severe as the Great Depression. Every day while I was writing this lecture at home, a new financial institution went down the drain or on the block and the end is not yet in sight. The third crisis, most ominous of all, is that of climate change and species destruction. It is accelerating faster than most scientists, much less governments, thought possible, causing many to ask if we have not already entered the era of the runaway greenhouse effect.
Each of these crises—social, financial, environmental--is negatively linked to the others, they intensify each other with negative feedback; they lead to worst-case scenarios. Let us take just a few examples of these perverse interactions.
The poverty-inequality crisis is a good place to start. This crisis is well documented; no one seriously denies the numbers. The World Bank recently recognised that it had grossly underestimated—by about 400 million—the numbers of the very poor, and even then its figures stop at the year 2005 and don’t include recent upheavals in food and energy costs that have swelled the ranks of the impoverished. Even more important, however, is the fact that for the first time in human history, there is no excuse for mass poverty and deprivation. Taking this assertion seriously already helps to point us towards a solution.
Most scholars and institutions concerned with such issues focus on poverty per se but I think it’s more useful and enlightening to focus on wealth. It may not be obvious to everyone that the world is actually awash in money. Most of it is still in North America and Europe but the numbers of the seriously rich on other continents are catching up fast. Those who have the money know very well how to keep it and, with their hired help, the battalions of lawyers, accountants and lobbyists, they are busy salting away their profits in tax havens, finding loopholes and protected investments, lobbying fiercely in parliaments and ministries against regulations on banks and financial markets. As you can see, I began by talking about poverty but I am already touching on the links with the financial crisis.
How many of you knew that ten million people, according to the latest Merrill-Lynch World Wealth Report, together boast investable, liquid funds of more than $40 trillion? That’s 40.000 billion or 40 followed by 12 zeroes. This wealth is above and beyond the value of their houses, cars, yachts, wine or art collections and so on and it is equivalent to about three times the GDP of either the United States or Europe. You might like another simple calculation. Assume that you have one billion dollars, which is the cut-off point for the latest Forbes magazine list of 1125 truly rich individuals in the world. If despite your billion you are such a dim-witted investor that you get only a five percent return on your fortune, you will still have to spend $137.000 every day of the year in sheer consumption or you will automatically become richer. My point is that cash is abundant and there’s no shortage of available wealth.
We also know a great deal about inequality. The UN World Institute for Development Economic Research, WIDER, estimates total world household assets at about $125 trillion. This is about three times world GDP and unsurprisingly, the top two percent of the world captures more than half of that wealth. The top 10 percent, which certainly includes many of us here, hold 85 percent, while the bottom half of humanity is obliged to stumble along with barely 1 percent. All you need to be classed in the top half of humanity is a meagre $2200 in total assets—that includes your house, your land or items like your car or your refrigerator--hardly a princely sum. If all household assets were divided equally—impossible and probably not even desirable to achieve—everyone on earth could have a share of $26.000. So again, money as such isn’t the problem.
In all the countries where 90 percent of the world’s population lives, inequalities have increased especially since the 1980s. At this point in the argument, the neo-liberals usually jump in to remind us that rising tides lifting all boats. They admit that inequalities have grown, but still argue that the poor are better off than they were. It seems almost rude to remind them in turn that falling tides have the opposite effect, they swamp and strand the more fragile boats and that is where the tide of the financial crisis is now taking us.
The real point, however, is not the absolute numbers but the fact that inequality makes the economy and also the natural environment worse for everyone, rich or poor. Two experienced academics, Tony Addison and Giovanni Andrea Cornia, put it this way: “Inequality has risen in many countries over the last two decades [and] little progress can be made in poverty reduction when inequality is high and rising....Contrary to earlier theories of development, high inequality tends to reduce economic growth and therefore poverty reduction through growth.”
Although it’s true that economic growth has reduced poverty, particularly in China, one must also ask “At what cost?” China has now overtaken the United States in greenhouse gas emissions and frighteningly has hardly even begun its transition to the automobile society. China also requires at least 10 times as much energy as the more mature industrial societies to produce a unit of GDP.
Growth certainly isn’t the answer ecologically, but even economically it fails the test because the benefits accrue almost entirely to the top of society. That is Cornia and Addison’s main point.
We have also learned in the past few months that it is entirely possible to push tens of millions of poor people off the ledge where they had just gained a foothold and send them back into the depths of poverty. Food riots, most of them urban, in at least thirty different countries have revealed another scary new phenomenon: the worldwide food crisis. Until now, food shortages and famines tended to be local, but so many societies have accepted neo-liberal trade mantras and become dependent on world markets for their basic daily staples that today a sudden spurt in prices is felt from Haiti to Egypt to Bangladesh.
The neo-liberal institutions like the World Bank, the WTO and the European Commission continue to pretend that poverty reduction will result from more growth and more trade. They fail to mention that both growth and trade will reinforce the environmental crisis. The food and energy crises have in turn strong links to the financial crisis, since speculation has been an important factor in both. Food and energy are also intimately linked to the climate crisis as one can see instantly when one thinks of carbon-loaded fossil fuels or of agro-fuels taking vast amounts of land away from food production.
At this point in the discussion, especially when one is speaking to concerned, engaged, decent people like those likely to be found at a Schumacher lecture, someone will raise two highly pertinent questions. The first is this: “ Isn’t there a point where people with huge fortunes say ‘enough is enough’ and start sharing?” Some do—Bill Gates and Warren Buffet are oft- cited examples. But as a class, I’m sorry to say that the answer is no. We know a lot about poverty lines but there is no such thing as a wealth line and the word “ enough “ is not part of the vocabulary of this class. You needn’t believe me. Listen to the expert who said “All for ourselves and nothing for other people seems in every age of the world to have been the vile maxim of the masters of mankind.” That was not Karl Marx but Adam Smith, in his classic 1776 treatise on capitalism, the Wealth of Nations. Little has changed since then.
The second question is “But why don’t the neo-liberal institutions, like the World Bank, the International Monetary Fund, the World Trade Organisation, the European Commission and the US government recognise that their policies have failed? Why do they keep on pushing them wherever and whenever they can?” The answer is not just that institutions are always loath to admit their mistakes, especially when these have killed and ruined so many millions. It is also that these policies have not failed.
To the contrary, they have produced exactly the results they were intended to produce. They have made a tiny fraction of international society rich beyond imagining, they have kept many dependent countries dependent in a new, less visible sort of colonial relationship and they have made so-called free trade, privatisation and unfettered capitalism the rule in countries that previously wanted little or nothing to do with them. Furthermore, they have imposed their policies with relatively little organised protest because their ideology has been expertly produced, packaged and delivered. Ideology can alas have a far stronger influence than facts. This is why we must fight on the practical front, of course, but also -- I happen to believe primarily -- fight the battle of ideas.
In any event, the massive funds belonging to rich people who already have most of the material goods they need or want are generally devoted to more or less speculative investments. Hedge funds, for example, are estimated to be sitting on about three trillion dollars, even today when so many investments have suffered melt-down. The financial institutions have been frantically innovating, particularly over the last decade. The entire incentive structure of the banking and finance industry has become perverse: the large institutions know perfectly well that they are “too big to fail”, consequently they also know that no matter how risky their actions, they will be bailed out by the public purse and has become all too plain. Beforehand, top management takes the money and runs.
Between the years 2000 and 2006, average annual profits of the financial sector in Great Britain averaged 20 percent—that is, two or three times the profit rate of other sectors of the economy. Huge bonuses, especially in the US and the UK, went to a handful of people, intensifying inequalities, whereas millions further down the ladder have lost their jobs and often their homes. Such profits were themselves clearly not sustainable because at some point, financial gain must be based not just on speculation but on the real economy.
Now that the bailouts are coming thick and fast, we have before us a singular example of socialism for the rich, the well-connected and Wall Street, in which the profits are grabbed by the usual suspects and the losses, tremendous losses, are billed to taxpayers. The United States has in effect nationalised these institutions and their debts--without getting anything from the financial industry in exchange.
As the sub-prime crisis has continued to ooze like a giant oil spill over the whole economy, speculators have searched for alternative profitable areas and created the food-price bubble trouble in which we now find ourselves. What happens then? The resource-poor, the world’s hungry, grab whatever they can, they chop down trees, kill animals and overexploit what little land they may have. Poverty is bad news for nature. But so is wealth. Even though there are far fewer of them, the rich cause much greater environmental damage with their dinosaurian ecological footprints. People who use the population argument to explain the multiple crises and who see in population control the solution are missing a crucial point—it’s not so much the number of people, although numbers are important, as their relative weight.
Furthermore, as we have repeatedly witnessed, the frequency and the fury of storms provoked by global warming hit the poor and the poorer regions of the globe hardest. There is worse to come. We have not even begun to comprehend the perils of climate change, including vastly increased numbers of environmental refugees who will crowd the planet due to droughts, flooding and crop failures. The Pentagon is already working on how to stem this tide by countering by whatever means necessary the refugees frantic efforts to reach more favourable lands. Government planning for this perfectly predictable phenomenon is limited to increased surveillance and security responses, not attempts to make outmigration less necessary. And yet the UN Intergovernmental Panel on Climate Change [IPCC] which is probably the most respected scientific body in the world, has already warned us that in Africa, the yields of rain-fed agriculture are likely to be reduced by 50 percent, deserts will gain ground, species destruction has already reached such proportions that we are in the midst of the sixth geological extinction of the planet’s four and a half billion-year history. The fifth extinction was the one that put paid to the dinosaurs.
I could go on drawing out relationships between the poverty, financial and ecological crises but I’m sure you need no more. The question is what we can do about all this and by “we” , I mean people everywhere who understand that the triple crisis is real and urgent.
Knowing that I will doubtless offend a great many people here, let me say straight away that there is an exit strategy, a genuine solution exists, but it is not in my view the one that many well-meaning environmentalists have long advocated. I’m sorry, but the time has passed for telling people to change their behaviour and their lightbulbs; that if enough people do this, then together “we” can save the planet. I’m sorry, but “we” can’t. Obviously I’m not suggesting that people shouldn’t change their behaviour and their lightbulbs—but even if the entire population of Europe does so—a most unlikely scenario—it’s not going to be enough. I agree as well with proposals for localisation and scaling down, but we have also got to scale up.
We need large-scale solutions, sophisticated, industrial solutions and huge involvement of governments in order to cut greenhouse gas emissions drastically enough to save our future. In other words, we must have the courage to challenge not just our political leadership but the entire neo-liberal, unregulated, privatised, capitalist economic system in place in order to provoke and promote a quantitative and qualitative leap in the scale of environmental action. Dare I say it here? Sometimes big can be beautiful and right now is one of those times.
Since I believe that individual and local solutions are necessary but tragically insufficient to address the seriousness and the urgency of the ecological crisis, I will use the rest of my time to discuss the twin problems of how to deal with governments and with the capitalist corporate production and financial system. The dilemma I wrestle with is this: Can we save the planet while international capitalism remains the dominant system, with its focus on profit, share-holder value, predatory resource capture and with no-holds-barred finance capital making more and more decisions? Can we rescue our natural home when confronted with a powerful caste that does not know the meaning of “enough” and is allergic to the kind of fundamental change a New Ecological Economic Order requires? Can we move forward when governments basically work for the interests of that class?
On bad days I reply No: We can’t save the planet. It’s impossible to reverse the climate crisis under capitalism. But that is a despairing answer and if true, it means there is virtually no hope. No hope, because I do not see how even the most convinced, most determined people could replace, much less overthrow capitalism fast enough to carry out the necessary systemic change before a runaway climate effect takes hold—always assuming it hasn’t done so already. First of all, there are not that many convinced and determined people prepared to act against the dominant economic system and there is nothing that resembles in the smallest degree an avant-garde revolutionary party that might lead them even if they existed. There is no one-size-fits-all replacement solution for capitalism. Considering the historical record and role of such parties and such solutions, I consider this an unmistakably good thing.
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But there are other obstacles to once-for-all revolutionary change. Nobody knows, figuratively speaking, who the Tsar is that we would have to overthrow today and nobody has a clue where to find the Winter Palace we would have to storm. We know the Winter Palace isn’t on Wall Street which was up and running again a few days after 11 September and is now taking full advantage of the bailouts. The US is only one of many world capitalist centres. Even if we were to win in one place, the nomadic money-moguls would simply mount their camels and head for another. The worlds of 1917 and of 2007 are utterly different, so we must try to move beyond this revolutionary impasse, this dead-end and find a new synthesis.
The question we face is not so much what to do — I think that is reasonably clear and I’m about to spell it out--but whether we will have the intelligence and the strength to seize the great opportunity with which we are now presented. Perhaps the words “great opportunity” strike you as wildly optimistic considering the long and dire preamble you’ve just listened to. However, I am now going to argue that not only are individual solutions insufficient but that the remedies offered by Kyoto, Bali, Bonn or whatever timid future agreements may be negotiated are tragically inadequate, Once more--I cannot stress this enough--the scale is crucial. And the great opportunity is to be found in the financial crisis itself. Properly targeted and used, it could open the door to the quantitative and qualitative leap we must make.
Some progressive people will reject the solution I propose, but I would then ask them what alternative they offer. The ecological crisis is of a different nature from the financial and poverty crises in the sense that once climate change is underway, as it is now, it is irreversible and we haven’t time for theoretically perfect solutions. With politics you can sometimes turn back and start over, but not where nature is concerned. So you can accuse me if you like of suggesting a way to give capitalism a new lease on life and I will plead guilty.
Let’s take first the slightly easier question “How can we deal with governments?” at least in the more or less democratic countries. China is another matter. People are generally way ahead of their governments in recognising the emergency. The political issue is not simply to "throw the rascals out" because they would be replaced by other rascals just as bad, just as beholden to the corporations, their lobbies and the financial markets. The trick is to convince politicians that ecological transformation and environmental practices can pay off politically.
This means that citizens, activists and experts, whether they like it or not, have got to work with local, regional and national politicians and governments; help them to find like-minded partners and formulate ambitious projects they can undertake on the broadest possible scale. Citizens, activists and experts must furthermore help these politicians and governments to become shining ecological examples with the electorate by publicising their efforts and their successes. Could the Schumacher Society become a kind of nexus for an ongoing forum of best-standards/best practice, bringing together political decision makers at every level with citizens groups and experts to discuss and carry out the best public-sector initiatives? Politicians must be convinced that these policies will not just work but also be highly popular with their constituencies.
Now let’s take the more difficult question of confronting the economic system as a whole. In his book Collapse, Jared Diamond examines several historical cases of social extinction due to over-exploitation of the environment. He identifies several common characteristics. One of these is the isolation of the elites, giving them the capacity to keep on consuming way above ecologically sustainable limits long after the crisis has already struck the poorer, more vulnerable members of society. That is where we are now globally, not just in isolated places like Easter Island or Greenland.
So how can we realistically combat the ecological footprints of our dinosaur elites, recognising that we don’t have the option of shouting “Off with their heads” in some imagined, world-wide revolution. Nor can we force them to change both themselves and the system that serves them so well, whereas we know that we must change that system because it is raping the planet and its inherent logic is to keep on doing so.
I can see only one way out: the coming together of people, business and government in a new incarnation of the Keynesian war economy strategy. I was born in the United States in 1934 and I remember well when the US switched massively to a war economy, converting all the rubber plants in my native city [Akron, Ohio] to production not for private cars and trucks but for the military. There was huge citizen involvement and support. Thousands of factories, research labs, housing projects, military bases, day care centres, and schools were built or expanded during the war. Public transport was improved and worked overtime to move millions of men and women to Army bases or new defence jobs.
Yes, there were still worker-management conflicts and yes, big corporations rather than small business got most of the government contracts but on the whole the workers were well paid, African-Americans and women began making a few modest gains and the whole war effort finally pulled the United States out of the Depression—it was Keynesianism on a huge scale. There was also an elite group of businessmen called “Dollar-a-Year Men” on loan from their companies to the government, who were charged with making sure that military production and quality targets were met. They had enormous prestige—my godfather was one and I was doubtless insufferable bragging to my little school friends about him.
Why am I going back over this ancient history? Because I think we have a similar opportunity today. The US and the world economy are heading downhill fast and the fallout for ordinary people in terms of jobs, housing, consumption and future welfare is going to be grave. If this diagnosis is right, then some new economic tools will have to be used to combat recession and stagnation, simply because the old ones have already been pushed to their limits and have little or nothing left to give.
The way Central Banks and Treasuries usually try to solve financial recession or depression is through standard remedies like interest rate cuts, currency devaluations or incurring new debt—but the United States has reached the end of its leash on that score. Interest rates are already extremely low—although not in Europe, where the European Central Bank and its hidebound president are ideologically committed to the same sorts of monetary policies that prolonged the Great Depression in the 1930s. The dollar is already weak, which makes US exports cheaper, but it can’t be devalued much further without risk. Deficit spending is already beyond belief. With the bailout of Fannie Mae and Freddie Mac, the Federal Reserve in effect took on their bad debt and added hugely to the liabilities of the United States Treasury. It risks doing so again. Households too are over-indebted and are losing more equity every day as the value of their dwellings deteriorates.
Since the traditional tools are worn out, the only new tool I can think of to pull the world out economic ruin and social chaos is a new Keynesianism, not military this time, but environmental; a push for massive investment in energy conversion, eco-friendly industry, new materials, efficient public transport; the green construction industry and so on.
Stringent standards for new buildings must become the norm; older ones can be “retro-fitted” on easy financial terms; families and commercial property-owners can receive financial incentives for installing green roofs and solar panels and sell excess energy to the grid. Research and development can be oriented towards alternative energies and strong, ultra-light materials for airplanes and vehicles. Technically speaking, we already know how to do such things, although some clean solutions are still more costly than dirty ones. Mass-produced, they would become less so.
All these new, eco-friendly industries, products and processes would have huge export value and could quickly become the world standard. I am trying to describe a scenario that can be sold to the elites because I don’t think they will embrace genuine environmental values and conversion if there’s nothing in it for them. But this approach is not merely a cynical attempt to get the elites to move in their own interests. There are also plenty of advantages in such an economy for working people. A huge ecological conversion is a job for a high-tech, high-skills, high-productivity, high-employment society. It would be supported, I believe, by the entire population because it would mean not just a better, cleaner, healthier, more climate-friendly environment, but also full employment, better wages, and new skills, as well as a humanitarian purpose and an ethical justification—just like World War II.
How could one finance such a huge effort? It would have to involve targeted government spending in the traditional Keynesian sense and governments are bound to complain that they haven’t the means to carry out such a policy.
The financial crisis provides the ideal opportunity both to finance the conversion and to get the runaway global financial system under control.
At present, taxes almost always stop at national borders. The secret is to take taxes up to the European level and to the international one through currency and other financial transaction taxes. People who oppose such schemes pretend they are not feasible because one would need to obtain the consent of every national jurisdiction in the world, but that is not correct. In fact, currency and other transaction taxes would require nothing more than political determination, the cooperation of the Central Bank and a few lines of software. For the currency transaction tax first proposed by James Tobin in the 1970s and now considerably refined, the tax base is the currency itself, not the place it’s traded. Thus the European Central Bank could easily collect the taxes on any transactions involving euros, the Bank of England the same for the pound, the Fed for the dollar and so on. Since currency trades now amount to $3.2 trillion dollars every day, a tax of one basis point, that is, a levy of one per thousand could raise a tidy sum for ecological conversion and poverty reduction. Britain already imposes a tax on stock market transactions but other European countries do not and should imitate Britain.
Carbon taxes are another much mooted and equally feasible idea. So is a unitary profits tax on transnational corporations, which would require knowing the total sales of the company, the total taxes paid, the sales realised in each jurisdiction and the tax paid in each jurisdiction. If, for example, a TNC reported that in country X, a particularly low-tax jurisdiction, it made 5 percent of its sales yet paid 50 percent of its taxes, the authorities would find it a bit fishy. I’m presenting an extremely crude summary here but believe me, there are experts—bankers, corporate lawyers, fiscal experts and accountants--who know exactly how to do such things. Perhaps to encourage more local consumption, one could also think about taxing the miles travelled by the food we eat and the clothes we wear.
We would not forget the poor countries of the South which are the major terrain of the poverty crisis. Debt cancellation for poor countries that the G-8 has been promising for a decade must finally happen but against the requirement that these countries also contribute to the planetary environmental effort through re-forestation, soil conservation, species protection and the like. They would also be required to involve their own people in democratic decision-making and the funds would be carefully monitored by independent auditors.
Tax havens that allow affluent individuals and corporations to avoid paying their fair share of the conversion should be shut down: it would be cheaper to pay the inhabitants of the Cayman Islands, Liechtenstein and the rest a living wage for twenty years. Plenty of cash would remain for eco-investments, job-creation and poverty relief.
In exchange for their bailouts, the banks and investment houses have to accept regulation—not just regulations to insure transparency and eliminate the incentives for stupid behaviour but also more stringent ones forcing them to participate in the ecological offensive. They should be obliged to devote X percent of their loan portfolios to eco-projects at below market interest rates—which they could make up by charging much higher rates on loans to dirty or otherwise anti-ecological projects. Low or no-cost financing for home conversion projects should be another compulsory priority for banks. This could give a huge spurt to the construction industry.
Nobody is asking for the moon here. Banks would still make loans, finance investments and earn a fair return for their services. Taxes on currency transactions at one basis point are not going to ruin anyone. Unitary profits taxes on large corporations would simply return us to the era when the companies paid their taxes because they couldn’t avoid them. The point is that a Keynesian taxation and redistribution system would be invested, nationally and internationally, both ecologically and socially, in education, health care, clean, green energy, efficient water distribution, communications technology, public transport, and various other things the world needs and that we already know how to do. These measures would, in turn go a very long way to creating opportunities for far more people to participate in the new green economy through jobs, life-long education, more social protection and reduced inequality. Getting the present financial crisis-producing, free-flowing, unregulated financial system under public and citizen control is the prerequisite for solving both the environmental and the poverty crises.
In other words, it’s a Public Relations dream. Whichever political parties understand this can win on such a programme without anyone having to bring down the entire capitalist system as a prior condition for saving the planet.
A Keynesian ecological programme would furthermore bring many constituencies together in a common cause. As matters now stand, politically speaking, no single interest group can solve the problem that concerns it most. By this I mean that, by themselves, ecologists can't save the environment; farmers alone can’t save family farms; trade unions alone can’t save well-paid jobs in industry and so on. Broad alliances are the only way to go, the only strategy that pays. The Global Justice Movement, as international social activists call it, has begun to have some success in working democratically and making alliances with partners who come from different constituencies but are basically on the same wavelength.
Now we must go beyond this stage and attempt something more difficult: to forge alliances also with people we don't necessarily agree with on quite major questions—for example, with business. This can only be accomplished by recognising that disagreements, even conflicts, can be fruitful and positive so long as the areas where it is possible to agree are sought out, identified and built upon. We must find where the circles of our concerns overlap. At least one of those overlaps ought to be saving our common home. I don't see any other way of generating citizen enthusiasm, involvement and the qualitative and quantitative leap in scale that is now required.
I haven’t time to elaborate on all the technical details concerning the content and the financing of necessary environmental investments. What I can do is guarantee you that the conversion to a green economy is technically feasible. The schemes for new taxes have been thought through; the industrial prototypes already exist; the machinery is ready to hum into action the moment people can make their politicians accept the challenge. Getting the financial system under control and taxing international capital at quite ridiculously low rates in order to redistribute it institutionally and internationally would be enormously popular. We could seriously attack climate change and eliminate the worst of world poverty within a decade. We are talking politics, not technical aspects here and trying to figure out a way to tame the raging beast, the crisis-producing, free-flowing, unregulated financial system and putting it under public and citizen control.
Capitalism is not sane in the sense that most people understand sanity. We humans normally think about our future, that of our children and the future of our countries and the world. The market, on the contrary, operates in the eternal present which, by definition, cannot even entertain the notion of the future and therefore excludes safeguards against future, looming destruction unless these safeguards are imposed upon it by law.
We need law, for sure, and political forces with the backbone to propose and to vote the law into existence, but we also need to think about human motivation. Remember the prestigious Dollar-a-Year Men of the 1940s and imagine what might happen if we could transpose them into the world of 21st century capitalism. A significant number of contemporary captains of capitalism, all of them with bloated, unimaginable salaries, might be brought to believe that money is all very well, but is there nothing more? Why not found an extremely exclusive Order of the Earth Defenders, or the Environmental Knights or the Carbon Conquerors who alone, in recognition of their special contributions to the national and international environmental conversion effort. They would have the right to display a highly visible emblem on a banner in front of their homes; a fanion on their cars, a green and gold rosette in their buttonholes like the French Legion d’Honneur or a Congressional Medal of Ecological Honour. They would belong to the small assembly of the anointed; those who provide the means and have the honour of saving the earth. Becoming a member ought to appeal to their competitive spirit.
In conclusion, let me say that myth has always been the driving force of every great human achievement, from Greek democracy to the Renaissance to the Enlightenment and the American and French Revolutions. So must it be in the coming age of Ecological Stewardship. To save the planet, we must change, quickly and profoundly, the way the majority thinks and feels and acts, and we must start with the social forces we have right here and right now, and no others. It’s no use wishing they were different ones or stronger, or wiser. We must play the hand history deals us.
For such a change, we will need six “Ms”, starting with Money, Management and Media. But even more important than these three “Ms”, we must try to create a new sense of Mission and Motivation and Myth at the noblest level. “Myth” in this sense has nothing to do with story-telling or lies. It is the grand narrative that empowers us to believe that we can accomplish what we must accomplish. It speaks to the deepest motivations of human consciousness and inspires the desire for honour and for a life’s work which transcends death. The elites already have Money, Management, Media. On our side, we have Mission, Motivation and Myth. If we can bring together all these, the future will take care of itself.
And wouldn’t that be nicer than having another war?
Thank you.
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